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29 June, 21:12

You are head of the Schwartz Family Endowment for the Arts. You have decided to fund an arts school in the San Francisco Bay area in perpetuity. Every 3 years, you will give the school $ 1 comma 000 comma 000. The first payment will occur 3 years from today. If the interest rate is 10.1 % per year, what is the present value of your gift?

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  1. 30 June, 00:31
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    PV = $749,269.48

    Explanation:

    Giving the following information:

    Every three years = $1000000

    i = 10,1%

    The first payment will occur 3 years from today.

    We need to find what is the present value of the gift

    Using the following formula:

    PV = FV/[ (1+i) ^n)

    PV = 1000000/[1,101^3] = $749,269.48
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