Help please?
How can I calculate the value of a series of 10 annual cash flows for $100 @6% 15 years from today if the first cash flow occurs, one year from today, five years from today and six yers from today
How can I calculate the value of a series of 10 annual cash flows for $100 @6% 15 years from today if the first cash flow occurs, one year from today, five years from today and six yers from today
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Summer school hurtn' ya? or maybe finals?
I'll take some liberties trying to figure out what you are asking. I assume you are asking "What will be the value in 15 years of a series of 10 annual cash flows ($100 per payment with a 6% yearly interest rate) if the first cash flow occurs A) one year from today, B) Five years from today, C) Six years from today."
I'm sure there is a more "financey" way to solve this, but I would have to dig through my finance books. Don't wanna do that, because we can easily solve it in Excel doing the "mathy" way. Basically, each payment makes 6% compounding interest for (15-x) years, where x is the year in which you got the payment.
A) You get the first payment 1 year from now, so it gets 14 years of compounding interest ($100x1.06^14). You get the second payment 2 years from now, with 13 years compounding interest ($100x1.06^13) and so on and so forth, til you get the last payment 10 years from now with 5 years compounding interest. Add up the values of all those payments ("future value") and boom: $1763.88
B) same as A, except the first payment starts 5 years from now, so it gets 10yrs of compounding interest ($100x1.06^10), All the way til the last payment gets 1 year of interest, so just $100x1.06. Answer: $1397.16
C) Same theory, but the last payment gets no interest since you receive it exactly 15 years from now. Answer: $1318.08
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