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 $15,000 for the next four years plus a lump sum payment of 35,000 at the end of year 4. 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 6.25 percent on the funds held. How much will the community shelter receive four years from today?

Explanation / Answer

FV = [15,000 * (1 + 0.0625)3] + [15,000 * (1 + 0.0625)2] + [15,000 * (1 + 0.0625)1] + 15,000 + 35,000
FV = 100,863.04............(answer)

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