1. Find the present value of 7 equal payments of $500 starting at the end of yea
ID: 1142167 • Letter: 1
Question
1. Find the present value of 7 equal payments of $500 starting at the end of year 7ifi-8%. ($1640.10) . What is the future value of this same cash flow at the end of year 13 Do the problem twice, using the A and then the P answer above to verify your answer. Find the uniform annual equivalent value of the original cash flow, if the payments were spread equally over years 1 to 13? ($207.47) 3. What is the equivalent value of the original cash flow at the end of year 10? Check your answer using two different approaches at the answer. 4.Explanation / Answer
1) PV = 500((P/A, 8%, 13) - (P/A, 8%, 6)) = 500*(7.9038-4.6229) = $1640.45 (Strat at the end of year 7, then 7 payments will be completed at the end of year 13)
2) Using A gives FV = 500*(F/A, 8%, 7) = 500*8.9228 = $4,461.40
Using P gives FV = $1640.45(F/P, 8%, 13) = $4,461.40
3) EUAV = $1640.45(A/P, 8%, 13) = $1640.45*0.1265 = $207.51
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