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denis-greek [22]
3 years ago
14

A one-time gift to your college will provide $25,000 in scholarship funds next year with that amount increasing by 2 percent ann

ually thereafter. If the discount rate is 5.5 percent, what is the current value of this perpetual gift? a) $748,602.49 b) $726,849.29c) $714,285,71
Business
1 answer:
kherson [118]3 years ago
6 0

Answer:

c) $714,285.71

Explanation:

The computation of the current value of this perpetual gift is shown below:

= (Scholarship fund provided next year) ÷ (discount rate - growth rate)

= ($25,000) ÷ (5.5% - 2%)

= ($25,000) ÷ (3.5%)

= $714,285.71

In order to find out the current value, we considered all the given information that are mentioned in the question

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Assume that you are saving up for a trip around the world when you graduate in two years. If you can earn 6% on your investments
AURORKA [14]

Answer:

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Explanation:

To calculate present value of a future amount, the future amount is discounted at the rate of interest for the period of investment, which reveals present value as on today. The technique is referred to as discounting technique.

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