Value of Series of Cash Flow 6D Research Assignment

Question 1. How to calculate the present value and the future value of a series of cash flows
The present value is the value based on the specific date of payment or series of payment made within a specified period. Future value measures a specific amount of money based on interest rates or rate of return. The Present Value of series of cash flows is calculated by substituting the cash flow for a specific period for Future Value, including the interest rate for the same period (DeFusco et al, 2015). Present Value determined by the cash flow for that specific period. For example, if the total number of the period to be calculated is N, the equation for the present value of cash flow series is the summary a single cash flow. Below is a formula to calculate present value (DeFusco et al, 2015).
PV=∑Nn=0CFn(1+in)n
The future value (FV) is calculated by multiplying the present value with accrual amount. The idea is that the amount today will be different in future based on the time
The formula for FV is
FV= Co X(1+ r)n
CO is the cash flow at that period
r- is the rate of return
n is the number of periods (DeFusco et al, 2015).
What is APR and EAR
The annual percentage rate (APR) is a process that informs us about the true cost of borrowing money. For instance, if you received an APR when buying a house you will receive the fee for paying the loan and interest to be paid, but the PR will not include the compound interest (Sakhartov & Folta, 2014). Effective annual percentage takes into account the compound interest. EAR expresses the amount one will earn assuming that the interest rate paid will be made at the same rate (Sakhartov & Folta, 2014). For example, if the investment is to pay 10 percent interest every six months, the APR is at 20 percent. However, the EAR will be at 21 percent by the end of the second six months. The individual will receive 10 percent interest at the need for the first six months.
Question 2. The difference and similarities in calculating the present value and future value of lump sum, annuity perpetuity and as series of unequal cash flow.