An anonymous donor wishes to give an endowment that will initially payout $50,000 per year forever. Assuming they can secure a 4% interest rate, how much would the donor need to contribute to the endowment so that I can pay out forever if a) it continues to pay out $50,000 per year continuously? b) the payouts, have a continuously compounded annual increase of 3%? c) the payouts, increased by $4000 per year continuously?
An anonymous donor wishes to give an endowment that will initially payout $50,000 per year forever. Assuming they can secure a 4% interest rate, how much would the donor need to contribute to the endowment so that I can pay out forever if a) it continues to pay out $50,000 per year continuously? b) the payouts, have a continuously compounded annual increase of 3%? c) the payouts, increased by $4000 per year continuously?
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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An anonymous donor wishes to give an endowment that will initially payout $50,000 per year forever. Assuming they can secure a 4% interest rate, how much would the donor need to contribute to the endowment so that I can pay out forever if
a) it continues to pay out $50,000 per year continuously?
b) the payouts, have a continuously compounded annual increase of 3%?
c) the payouts, increased by $4000 per year continuously?
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