In: Economics
If Desmond originally planned to donate $250,000 to the university today, what equivalent amount could he donate at the end of 10 years from now instead? Assume his interest rate is still 7% per year, compounded annually.
Present value = 250000 $
Time = 10 years
Interest rate = 7 %
Amount he could donate at the end of 10 years = Present value * (1 + interest rate) ^t
= 250000 * (1 + 7 %)^10
= 250000 * 1.96715135728956532249
= 4,91,787.84 $
So at the end of 10 year he must donate 4,91,787.84 $ to match the present value of 250,000 at interest rate of 7 %