Example 7
Two receipts of $1,000 each are desired at the EOYs 10 and 11. To make
these receipts possible, four EOY annuity amounts will be deposited in a
bank at EOYs 2, 3, 4, and 5. The bank's interest rate is 12% per year.
a) Draw a cash-flow diagram for this situation.
b) Determine the value of A that establishes equivalence in your cash-
flow diagram. Select a reference Point for equivalence
c) Determine the lump-sum value at the end of year 11 of the completed
cash-flow diagram based on your answers to Parts (a) and (b).