Assume you are working with thefoundation to fund ascholarship in your name. Currently, the foundation can earn a 5percent return on any donations.A. How much money would you need to donate to fund ascholarship that pays $25,000 every year forever, starting oneyear from now?B. How much money would you need to donate if thefoundation could increase their return to 7 percent on anydonations?

Since payment is due for indefinite period, we need to use PV of perpetuity formula to calculate…

Answered: Assume you are working with the…

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

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?
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Camosun College has just received a donation of $50,000. The donor has stipulated that the funds should be used to fund an ongoing annual bursary with the first payment given out in one year. If the money is invested into an account earning 3.71% compounded annually (j1), how much will the annual bursary be? Your Answer:
am. 168.
10. Tracy won a scholarship which pays $5,000 per year for the next three 3 years beginning a year from today. What is the present value of the scholarship using a discount rate of 7%? 11. Jason will receive $8,500 a year for the next 15 years. Assuming an interest rate of 7%, calculate the present value of the future payments if first receipt occurs today?
Rr.8.
Mike wants to donate $5,000,000 to establish a fund to provide an annual scholarship in perpetuity. The fund will earn an interest rate of 4.57% p.a. compounded half-yearly (j2=4.57% p.a.) and the first scholarship will be first awarded 3.5 years after the date of the donation. (a) What is the amount of the annual scholarship (rounded to two decimal places)? Question 9 Answer a. 127913.37 b. 255507.69 c. 260410.57 d. 258749.57 Mike wants to donate $5,000,000 to establish a fund to provide an annual scholarship in perpetuity. The fund will earn an interest rate of 4.57% p.a. compounded half-yearly (j2=4.57% p.a.) and the first scholarship will be first awarded 3.5 years after the date of the donation. (b) Assume that two years after the donation, Mike needs to withdraw $1,000,000 from the fund and use the remaining amount to provide an annual scholarship in perpetuity. The time of the first scholarship will be unchanged (3.5 years after the date of the donation). What is the new annual…
Assume UMASS Boston just received 10 million dollars from a major donor and the school's fund can earn a 4.5% interest rate (compounded yearly). If the school uses the interest to payout yearly scholarships, how much can the school payout in yearly scholarships due to this donation? (Please use at least 5 decimal places and do not use $ symbol in the answer)
An Allied Health Scholarship fund wants to insure that it can provide $50,000 annually in scholarships forever How much money would have to be reinvested each year at 8% interest to generate the funds for the scholarships?
You wish to establish a permanent scholarship at Bond University providing a worthy student with $1000 annually. If invested monies generate an 8% return, how much is needed in the scholarship fund?
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Jeremiah Wood wants to set up a fund to pay for his daughter's education. In order to pay her expenses, he will need $22,000 in four years, $23,400 in five years, $24,600 in six years, and $26,100 in seven years. If he can put money into a fund that pays 5 percent interest, what lump-sum payment must Jeremiah place in the fund today to meet his college funding goals? Round the answer to the nearest cent. Round PV-factor to three decimal places.

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