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 $32,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 10 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. $ (240,421) 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 $32,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 10 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. $ (240,421) Contribution

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

Problem 1PS

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Similar questions

Present value. Prestigious University is offering a new admission and tuition payment plan for all alumni. On the birth of a child, parents can guarantee admission to Prestigious if they pay the first year's tuition. The university will pay an annual rate of return of 6.5% on the deposited tuition, and a full refund will be available if the child chooses another university. The tuition is expected to be $12,000 a year at Prestigious 18 years from now. What would parents pay today if they just gave birth to a new baby and the child will attend college in 18 years? How much is the required payment to secure admission for their child if the interest rate falls to 2.5%? What would parents pay today if they just gave birth to a new baby and the child will attend college in 18 years? (Round to the nearest cent.)
Vijay
Imagine you are a philanthropist who would like to donate to a charity that provides shelter and assistance to homeless individuals. You would like to donate enough money to the charity to ensure that they can provide shelter for 13 homeless individuals every year in perpetuity. The cost of providing shelter per individual is $140 per day. If your investment fund pays a return of 2% per year, how much do you need to donate to the charity now so
A generous alum would like to establish an endowment that would sponsor a student organization's conferences in perpetuity. A one-time cost of $500,000 must be paid today to purchase supplies for the conference. The conference is held once every four years and costs $90,000 . The first conference will take place at the end of year 4 . The alum's gift is invested in an account that earns 4% annually. How much would the alum need to place in the endowment to be able to sponsor the student organization's conferences? [Enter your answer with no dollar sign or comma.]
As a future graduate of the University of Minnesota, someday you would like to endow a scholarship (meaning give the university money in your name) to pay for tuition expenses for future UMN students. Assume you just graduated (congratulations!). You plan to work for fifteen years after graduation before endowing this scholarship (at the end of the fifteenth year AFTER graduation). Annual tuition at UMN is $10,000 today, and is expected to grow at the long-term average rate of inflation of 3% per year forever. Savings are expected to earn a return of 7% per year forever. a) The first tuition payment is due one year after the scholarship is endowed. How much will the tuition be when your scholarship makes the first payment? b) You would like the scholarship to pay all tuition for one student per year for the twenty years following the creation of the endowment, how much money do you need to endow the scholarship? c)If you would like the scholarship to pay for tuition for one student…
Tatsuo has just been awarded a four-year scholarship to attend the university of his choice. The scholarship will pay $14,500 each year for the next four years to reimburse normal school-related expenditures. Each $14,500 payment will be made at the end of the year, contingent on Tatsuo maintaining good grades in his classes for that year. Assuming an annual interest rate of 8.0%, determine the value today of receiving this scholarship if Tatsuo maintains good grades. (FV of $1, PV of $1, FVA of $1, and PVA of $1) (Use appropriate factor(s) from the tables provided. Round your answer to 2 decimal places.) Present value of annuity
Donna wants to create a scholarship fund by saving for several years before the fund starts making annual scholarship payments forever. She plans to save $222,000.00 per year for 6 years. Her first savings contribution is expected in 1 year. What is the expected amount of the scholarship payment that the fund will make in 7 years if the fund is expected to have a return of 7.86 percent per year, make annual scholarship payments that grow annually by 2.34 percent forever, and make its first scholarship payment in 7 years? O $71,691.25 (plus or minus 10 dollars) $89,580.58 (plus or minus 10 dollars) $96,621.62 (plus or minus 10 dollars) $77,326.18 (plus or minus 10 dollars) Onone of the answers are within 10 dollars of the correct answer 0000
A schools parent council wants to setup up a scholarship fund. How much needs to be invested today so that a scholarship of $1000 can be awarded every year for the next 10 years. Interest on the fund is 7% and will be compounded annually
Maria is planning to attend a four-year university. The list below shows the estimated costs for one year. Her family devised a periodic savings plan that will have a total value of $48,000 by the time Maria will begin college. Maria will participate in a work-study program that pays for her room and board each year. With the work-study and her family's contribution, for how many years of college will be paid? Round to the nearest hundredth. Four-Year University Estimated Costs Tuition and Fees. $13,200.00 Room and Board. $3,500.00 Books and Supplies $1,300.00 Personal Expenses. $1,700.00 a about 2.96 b about 2.67 c about 2.61 d about 2.44
A local businessman has set up a school fund that will last forever that can earn 3.1% annually. How much money do you have to deposit today in order to be able to provide three annual 10,000 scholarships, each to be paid at the end of the year?
A recent alumnus of your university gifted money to the school to fund annual scholarships for students in need. The school expects to earn an average rate of return of 5.5% and distribute $50,000 annually in scholarships. What was the amount of the gift?
A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $21,413.00 per year (all expenses included). Tuition will increase by 4.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 8.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years) The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college.

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