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An investment will pay you $120 in one year and $200 in two years. If the interest rate is 4%, what is the present value of these cash flows?

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Answer:

Present value= $300.29

Explanation:

Giving the following information:

An investment will pay $120 in one year and $200 in two years. The interest rate is 4%.

To calculate the present value we need to use the following formula:

PV= FV/(1+i)^n

PV= present value

FV= final value

i= interest rate

n= number of years

PV1= 120/1.04^1= 115.38

PV2= 200/1.04^2= 184.91

Present value= $300.29

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