Find present equivalent value PW and FW in the cash flow

Hi.

http://i.imgur.com/j8EU6.png

This is the problem.

I tried to find the FW first. I see the problem as "I deposite an initial money PW, and on the 4th, 5th, 6th and 7th I deposited $100". How much do I get at the end of the eighth year with i = 0.12.

That's how I interpret it.

I started by finding PW

$\displaystyle \frac{100}{1.12^{4}} + \frac{100}{1.12^{5}} + \frac{100}{1.12^{6}} + \frac{100}{1.12^{7}}$

which gives me 63.55 + 45.56 + 50.66 + 45.23 = 205. The outflow on is 40.39.

Either using 205 or 205-40.39, and then multiple that by (1 + 0.12) ^ -8 to get the PW, I either get 82.79 or 66.4832.

I kinda have the answer. I think the PW is 175.8 and FW is 935.28.

How do I get PW? What's wrong with my calculation?

Thanks

Re: Find present equivalent value PW and FW in the cash flow

FW=$935 seems too far out. I get something close to FW=$310.10 & PW=$286.37 but not sure.

Re: Find present equivalent value PW and FW in the cash flow

Where does PW and FW come from? Should be PV (Present Value) and FV (Future Value).

FV = 100(1.12^4 + 1.12^3 + 1.12^2 + 1.12^1 + 1.12^0) = 635.28

PV = FV / 1.12^8 = 635.28 / 1.12^8 = 256.58

Pretty basic stuff: where were you stuck?

Re: Find present equivalent value PW and FW in the cash flow

In case this helps; what "it looks like":

Code:

`Y INTEREST BALANCE DEPOSIT INTEREST BALANCE`

0 256.58 .00

1 30.79 287.37 .00

2 34.48 321.85 .00

3 38.63 360.48 .00

4 43.25 403.73 100.00 .00 100.00

5 48.45 452.18 100.00 12.00 212.00

6 54.27 506.45 100.00 25.44 337.44

7 60.77 567.22 100.00 40.49 477.93

8 66.06 635.28 100.00 57.35 635.28