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I have a general finance question, its a hw problem I am just not getting Please help, thank you :)?
A group of 10 public spirited citizens has agreeed that they will support the local school hto lunch program. Each year one of the group is to pay 10,000 dollars cost that occurs CONTINUOUSLY and UNIFORMLY during the year. Each member of the group is to underwrite the cost for one year. Slips of paper are numbered 1 to 10 and put in a hat You draw slip 7. Assuming a 10% annual interest rate compounded annually, how much do you need to set aside now to meet your obligation in year 7
2 Answers
- Anonymous1 decade agoFavorite Answer
Its a Present Value problem. You know the Future Value of the money is 10k, you know the internal rate of return is 10%. The formula to find the anwser is:
PV=Future Value/(1+interest rate)^term.
The FV is 10,000, intererst rate is .10, and the term is 7 years. Just do the math.
Hope that helps.