An investment pays you Rs 100 at the end of each of the next 3 years. The investment will then pay you Rs 200 at the end of Year 4, Rs 300 at the end of Year 5, and Rs 500 at the end of Year 6. If the rate of interest earned on the investment is 8 percent, what is its present value? What is its future value?

You want the present and future values of the series of payments ₹100, 100, 100, 200, 300, 500 at the end of years 1 through 6, given interest earned is 8%.

Present value

The present value of a payment at interest rate r is ...

PV = P(1 +r)^-t

where the payment P is made at the end of t years.

The present value of a series of payments is the sum of the present values of each.

PV = 100(1.08^-1) +100(1.08^-2) +100(1.08^-3) +200(1.08^-4) +...

300(1.08^-5) +500(1.08^-6)

PV = 923.98

The present value of the investment is ₹923.98.

Future value

The future value in year n is the sum of products ...

FV = P(1 +r)^(n -t)

where P, r, t are defined as above.

It can be found from the present value by multiplying by (1+r)^n.

FV = 923.98(1.08^6) = 1466.23

The future value of the investment is ₹1466.23.