The government has imposed a fine on the Corner Tavern. The fine calls for annua

Question

The government has imposed a fine on the Corner Tavern. The fine calls for annual payments of $125,000, $100,000, $75,000, and $50,000, respectively, over the next four years. The first payment is due one year from today. The government plans to invest the funds until the final payment is collected and then donate the entire amount, including the investment earnings, to help the local community shelter. The government will earn 5.5 percent on the funds held. How much will the community shelter receive four years from today?

Explanation / Answer

Hi,

Please find the answer as follows:

Future Value = 125000*(1+.055)^3 + 100000*(1+.055)^2 + 75000*(1+.055)^1 + 50000 = 387207.67

Answer is 387207.67.

Thanks.

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