Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

Previous problemNext problem

Struggling with Financial Accounting?

Join thousands of students who trust us to help them ace their exams!Watch the first video

Multiple Choice

Given the following cash flow stream: $1,000 at the end of Year 1, $1,500 at the end of Year 2, and $2,000 at the end of Year 3, what is the future value at the end of Year 3 if the interest rate is 6.5% compounded annually?

$4,837.25

$4,900.50

$4,650.00

$4,729.13

Previous problemNext problem

Verified step by step guidance

Step 1: Understand the problem. The goal is to calculate the future value (FV) of a cash flow stream at the end of Year 3, given an annual interest rate of 6.5%. Each cash flow needs to be compounded to the end of Year 3.

Step 2: Use the future value formula for each cash flow. The formula is: FV = PV × (1 + r)^n, where PV is the present value (cash flow), r is the annual interest rate (expressed as a decimal), and n is the number of years until the future value date.

Step 3: Calculate the future value of the cash flow at the end of Year 1 ($1,000). Since it is compounded for 2 years to reach the end of Year 3, use the formula: FV = 1000 × (1 + 0.065)^2.

Step 4: Calculate the future value of the cash flow at the end of Year 2 ($1,500). Since it is compounded for 1 year to reach the end of Year 3, use the formula: FV = 1500 × (1 + 0.065)^1.

Step 5: Add the future value of the cash flow at the end of Year 3 ($2,000), which does not need compounding as it is already at the end of Year 3. Sum all the future values calculated in Steps 3, 4, and 5 to get the total future value at the end of Year 3.