Question

1. The government has imposed a fine on the Corner Tavern. The fine calls for annual payments of $150,000, $100,000, $75,000, and $50,000, respectively, over the next four years. The first payment is made now. The government plans to invest the funds until the final payment is collected and then donate the entire amount, including the investment earnings, to help the local community shelter. The government will earn 6 percent on the funds held. How much will the community shelter receive four years from today? (3 points )

Answer 1

The community shelter will receive $ 420,512.40. (Cumulative amount of investment). The workings are as below:

Year	Compounding Period	Reciept Amount	Compounding Factor	Cumulative amount at the end of tenure
(No. of years from receipt date)	(1+r)n i.e (1.06)compounding years	(Receipt amount * Compounding factor)
0	3	150,000	1.1910	178,652.40
1	2	100,000	1.1236	112,360.00
2	1	75,000	1.0600	79,500.00
3	0	50,000	1.0000	50,000.00
Total	420,512.40