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?

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