Question 2 (10 marks)

This question relates to material covered in the Topics 1 to 3. This question addresses the 5th and 6th subject learning outcomes.

Following is an example of a cash flow timeline developed using the Table Function within MS Word. Please use this example as a means to develop a similar timeline in your answer to the following question

Below are the expected cash flows and interest rates for the next nine years. Cash flows will occur at the end of the nominated years.

Cash Flows			Interest Rates
Year 0			Years 1 - 5	2.5%
Year 1	+$ 5,000
Year 2
Year 3	+$ 5,000
Year 4	-$ 2,500
Year 5	+$ 2,700
Year 6			Years 6 8	5%
Year 7
Year 8	$ 8,000
Year 9			Years 9 - 10	6%
Year 10	$20,000

(a) Using the Table function within MS Word, draw a timeline (as modelled at the start of the question) showing the above cash flows and interest rates (2.5 marks)

(b) What will be the accumulated value of all these cash flows at each of the following times (7.5 marks):

Time ₀

Time ₆

Time ₁₀

Example only: % 5 5 6.5 Cfi $1000 $1000 $1000 YEAR 0 1 2 3 Example only: % 5 5 6.5 Cfi $1000 $1000 $1000 YEAR 0 1 2 3