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

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

Step-by-step explanation:

When money is invested into a venture, it is denoted with a negative sign (-) to indicate that this is money leaving the investor as opposed to a positive sign (+) to show when money is coming back to the investor.

In year 3, the investor invested $500 so in year 3 the Cashflow was -$500.