Show All Work 1. Year 1 2 3 4 Cash Flow $600 $-600 $600 $-600 What is the future
ID: 2640890 • Letter: S
Question
Show All Work
1.
Year
1
2
3
4
Cash Flow
$600
$-600
$600
$-600
What is the future value
of the set of cash flows 4 years from now? Assume an interest rate of 10%
2.
Starting today, George
is
going to contribute $3
00 on the first of each month to his retirement
account. His employer will contribute an addi
tional 50%
of the amount George contributes.
If both George
and his employer continue to do this and h
e can earn a monthly rate of .68
%,
how much will George
have in his retirement account 35
years from now?
Explanation / Answer
1. Future value of cash flows = 600*(1+10%)^4-600*(1+10%)^3+600*(1+10%)^2-600*(1+10%)^1
=$145.86
Hence,the present value is $145.86
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We need to use the future value of annuity due formula
Total amount recieved = 300+50%*300
=$450
Future value = (1+0.68%)*450*(((1+0.68%)^(35*12)-1)/0.68%)
=$1080981.87
Hence, the correct answer is $1080981.87