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question (1)- You are head of the Schwartz Family Endowment for the Arts. You have decided to fund an arts school in the San Francisco
question (1)- You are head of the Schwartz Family Endowment for the Arts. You have decided to fund an arts school in the San Francisco Bay area in perpetuity. Every five years, you will give the school $700,000. The first payment will occur four years from today. If the interest rate is 9.5% per year, what is the present value of your gift?
question (2)- You have a loan outstanding. It requires making three annual payments at the end of the next three years of $4000 each. Your bank has offered to restructure the loan so that instead of making three payments as originally agreed, you will make only one final payment at the end of the loan in three years. If the interest rate on the loan is 5.63%, what final payment will the bank require you to make so that it is indifferent between the two forms of payment?
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