Well, to do that we're gonna have to move each cash flow forward in time to period

4.

So look at the cash flow in period 3, I need to move that forward one period, so

I multiply by 1 + R raised to the positive power 1, we're going forward one period.

Cash flow two has to go forward two periods.

So we're gonna multiply that by our discount factor raised to the power

positive 2.

And likewise, for the cash flows in period 0 today, and one year from today.

If we do the arithmetic, we get these future values of the cash flows,

right, 105, 110, 115, 121.

We can now add all of these cash flows,

cuz they're all on the same time for period 4 time units.

And if we do that, I get 452.564.

So what does this mean?

How do we interpret that?

Well, we will have $452.56 at the end of four years if we save $100

starting today for the next three years, and our money earns 5% per annum.

Interpretation 2, the future value four years from today of saving

$100 starting today for the next three years at 5% per annum is $452.56.

So, what's going on here?

What's going on behind the scenes?

Well, we're gonna deposit $100 today.