Question

- The local botanical society wants to ensure that the gardens in the town park are properly cared for. The group recently spent $100,000 to plant the gardens. The members want to set up a perpetual fund to provide $100,000 for future replantings every 10 years. a) If interest is 5%, how much money is needed forever pay the cost of planting?

Answer 1

Answer:

$159,000

Explanation:

We are going to compute an A which is equivalent to $100,000 at the end of 10 years.

Therefore:

A= $100,000 (A/F, 5%, 10)

= $100,000 (0.0795) = $7,950

Infinite series is :

P= A/i= $7,950/0.05= $159,000

Therefore the money needed is $159,000