You have just received a windfall from an investment you made in a friend's business. He will be paying you $10,000 at the end of this year, $20,000 at the end of the following year, and $30,000 at the end of the year after that (three years from today). The interest rate is 3.5% per year. a. What is the present value of your windfall? b. What is the future value of your windfall in three years (on the date of the last payment)?

a. $55,390.29

b. $61,412.20

Step-by-step explanation:

a. To find the present value of your windfall, each value must be brought back to the present year at a rate of 3.5% per year. The present value is:

The present value of your windfall is $55,390.29.

b. To find the future value of your windfall at the date of the last payment, simply compound the preset value amount obtained on the previous item for three years at a rate of 3.5%:

The future value of your windfall is $61,412.20.