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Present value /Future Value

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You have just received a windfall from an investment you made in a friend's business. He will be paying you $10,000 at the end of this year, $20,000 at the end of the following year, and $30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year.

a. What is the present value of your windfall?
b. What is the future value of your windfall in three years (on the date of the last payment)?

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Solution Summary

The solution explains the calculation of present value and future value.

Solution Preview

a. In calculating the present value we discount the cash flows. The discounting rate is 3.5% and the formula used is
PV = ...

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