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A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $66,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 8 percent, how much must the donor contribute today to fully fund the scholarship? Note: Negative value should be indicated by a parenthesis. > Answer is complete but not entirely correct. $ (681,317) Contribution

A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $66,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 8 percent, how much must the donor contribute today to fully fund the scholarship? Note: Negative value should be indicated by a parenthesis. > Answer is complete but not entirely correct. $ (681,317) Contribution

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $66,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 8 percent, how much must the donor contribute today to fully fund the scholarship? Note: Negative value should be indicated by a parenthesis. > Answer is complete but not entirely correct. Contribution $ (681,317)
Transcribed Image Text:A wealthy graduate of a local university wants to establish a scholarship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $66,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 8 percent, how much must the donor contribute today to fully fund the scholarship? Note: Negative value should be indicated by a parenthesis. > Answer is complete but not entirely correct. Contribution $ (681,317)
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