You Own a Contract That Promises an Annuity Cash Flow

question 46

Multiple Choice

You own a contract that promises an annuity cash flow of $100 beginning-of-the-year cash flows for each of the next three years (note: the first cash flow is today) .At an interest rate of 10%,what is the future value of this contract exactly three years from today?

• A)$248.69
• B)$273.55
• C)$331.00
• D)$364.10

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Definitions:

Cash Flows

The aggregate sum of cash inflows and outflows in a business, significantly impacting its ability to meet short-term obligations.

Investing Activities

Financial activities related to the acquisition and disposal of long-term assets and other investments not included in cash equivalents.

Buying Stocks

The act of purchasing shares in a company with the expectation of earning a return on investment through dividends or stock price appreciation.

Cash Flow

Cash flow refers to the net amount of cash and cash-equivalents being transferred into and out of a business.