Question

The government imposed a fine on the Not-So-Legal Company. The fine calls for a payment of $100,000 today, $150,000 one year from today, and $200,000 two years from today. The government will hold the funds until the final payment is collected and then donate the entire amount to charity. The government has agreed to pay annual interest of 3 percent on the held funds. How much will be donated to charity in two years?

Answer 1

Answer:

The amount after 2 years will be $460590

Explanation:

The payment which is done 2 year from today = $200000

The payment which is done one year from today = $150000

Rate of interest = 3 %

So the amount after 1 year

$A=P(1+\frac{r}{100})^n=150000(1+\frac{3}{100})^1= 154500$

The amount which is done today = $100000

So amount after 2 years

$A=P(1+\frac{r}{100})^n=100000(1+\frac{3}{100})^2= 106090$

So total amount after 2 years = $106090+$154500+$200000 = $460590