Problem 3

You expect to receive a one-time payment of $1,000 in 5 years and a second payment of $1,500 in 10 years. The annual interest rate is 5%.

Part 1

What is the present value of the combined cash flows?

Part 2

If you invest the amount that you'll receive in 5 years, how much money will you have in year 10 (including the cash flow in year 10)?

Part 3

If you invest the amount found in part 1 for 5 years, how much will you have at the end?

Part 4

If you invest the amount found in part 3 for another 5 years, how much will you have at the end?