Person deposits money for 2 years only

a) Present value

As amount is deposited at the end of the year, we have to discount both year deposits to arrive at Present value

Present value = 1000 x PVIF @10%, 1 year + 2000 x PVIF @10%, 2 years

Present value = 1000 x 1/(1+0.10)^1 + 2000 x 1/(1+0.10)^2

Present value = 1000 x 0.909091 + 2000 x 0.826446 = 909.091 + 1652.892 = 2561.98

ANSWER : 2561.98

b) Future value

As amount is deposited at the end of the year, 1000 will get one year interest but 2000 will not get any interest as it is deposited at the end of year 2.

Future value = 1000 x (1+0.10) + 2000 = 3100

ANSWER : 3100