Assuming an interest rate of 6.5 percent, what is the value of the following cash flows five years from today?

Year	Cash Flow
1	$ 3,590
2	4,695
3	5,680
4	6,970
Multiple Choice

$24,155.19

$23,602.37

$22,680.93

$24,523.82

$23,188.98

To find the future value of the given cash flows five years from today at an interest rate of 6.5%, we will calculate the future value of each cash flow individually, and then sum them up.

The formula for the future value (FV) of each cash flow is:

\[
FV = \text{Cash Flow} \times (1 + r)^{n}
\]

Where:
- $ r = 6.5\% = 0.065 $ (annual interest rate)
- $ n $ is the number of years from the cash flow year to the 5th year.

Let's calculate the future value for each cash flow:

1. **Year 1 Cash Flow ($3,590):**
   \[
   FV = 3,590 \times (1 + 0.065)^{4}
   \]

2. **Year 2 Cash Flow ($4,695):**
   \[
   FV = 4,695 \times (1 + 0.065)^{3}
   \]

3. **Year 3 Cash Flow ($5,680):**
   \[
   FV = 5,680 \times (1 + 0.065)^{2}
   \]

4. **Year 4 Cash Flow ($6,970):**
   \[
   FV = 6,970 \times (1 + 0.065)^{1}
   \]

Now, I'll calculate the future values and sum them up to get the total value five years from today.The total future value of the given cash flows five years from today at an interest rate of 6.5% is approximately **$24,155.19**.

Thus, the correct answer is:

**$24,155.19**

Would you like more details or have any questions? Here are 5 related questions:

1. How do interest rates impact the future value of cash flows?
2. What is the difference between future value and present value?
3. How do you calculate future value for irregular cash flows?
4. What are the assumptions of compound interest in these calculations?
5. How would changing the interest rate affect the future value?

**Tip:** The further a cash flow is from today, the more significant the impact of compounding interest on its future value.

Assuming an interest rate of 6.5 percent, what is the value of the following cash flows five years from today?

Year	Cash Flow
1	$ 3,590
2	4,695
3	5,680
4	6,970

Multiple Choice:
$24,155.19
$23,602.37
$22,680.93
$24,523.82
$23,188.98

Calculate the future value of cash flows over five years with a 6.5% interest rate. This problem involves the future value formula for cash flows and compound interest, making it ideal for college-level finance and mathematics students.

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