question archive The government imposed a fine on the Not-So-Legal Company
The government imposed a fine on the Not-So-Legal Company
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The government imposed a fine on the Not-So-Legal Company. The fine calls for a payment of $100,000 today, $150,000 one year from today, and $200,000 two years from today. The government will hold the funds until the final payment is collected and then donate the entire amount to charity. The government has agreed to pay annual interest of 3 percent on the held funds. How much will be donated to charity in two years?
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Answer:
The total amount received after 3 years
=100000*(1+ 0.03)^2 +150000(1+ 0.03) +200000
=100000*(1.03)^2 +150000*(1.03) +200000
=106090 +154500+200000
=$460590
Step-by-step explanation
Rate of interest = 3%
1st payment will earn interest for 2 years, 2nd payment for 1 year and the last payment will not earn any interest as the fund will be immediately donated.
The future value of the amount = 100,000*1.03^2 + 150,000*1.03 + 200,000
future value of the amount = 460,590
