Question

You plan to invest $300 today and $500 three years from today. Two years from today, you plan to withdraw $50. Which of these is a correct statement regarding a time line for computing the future value of your cash flows four years from today?

A. The cash flow at year 4 is a negative $500.
B. The cash flow at year 3 is a negative $500.
C. The cash flow at year 2 is a negative $50.
D. The cash flow at time 0 is a positive $300.

Answer 1

B. The cash flow at year 3 is a negative $500.

Step-by-step explanation:

In case of Investment the cash outflow results.

In years 1, there is a negative cash flow of $300, because $300 is invested which decreased the cash balance.

In case of withdrawal in year 2, there is a positive cash flow of $50.

In years 3, there is a negative cash flow of $500, because $500 is invested which decreased the cash balance.