If Desmond originally planned to donate $250,000 to the university today, what equivalent amount could he...

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.

Solutions

Expert Solution

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 %

Rahul Sunny answered 1 year ago

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