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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Louis Snow

18 April, 22:20

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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Minnie · Answer 1

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