(b) As an added benefit to staff, Insignia intends to start a Trust Fund to assist the children of its employees with university tuition via scholarships. The intention of the company is to assist 4 different students annually with a $10,000 grant each. The grant is expected to be increased by 5% annually and provide scholarships indefinitely. Required: i. Assuming this fund will earn 10% interest per annum, calculate the value of the fund today. ii. Insignia decides to fund this amount (calculated in (i)) via monthly deposits over the next 12 months in an enhanced savings account, after which the scholarships will begin. Assuming a return of 12%, compounded monthly, how much would Insignia need to deposit monthly over the next year, to achieve this goal? iii. Compute the effective annual rate on this enhanced savings account.

(b) As an added benefit to staff, Insignia intends to start a Trust Fund to assist the children of its employees with university tuition via scholarships. The intention of the company is to assist 4 different students annually with a $10,000 grant each. The grant is expected to be increased by 5% annually and provide scholarships indefinitely. Required: i. Assuming this fund will earn 10% interest per annum, calculate the value of the fund today. ii. Insignia decides to fund this amount (calculated in (i)) via monthly deposits over the next 12 months in an enhanced savings account, after which the scholarships will begin. Assuming a return of 12%, compounded monthly, how much would Insignia need to deposit monthly over the next year, to achieve this goal? iii. Compute the effective annual rate on this enhanced savings account.

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

Assume you are working with the foundation to fund a scholarship in your name. Currently, the foundation can earn a 5 percent return on any donations. A. How much money would you need to donate to fund a scholarship that pays $25,000 every year forever, starting one year from now? B. How much money would you need to donate if the foundation could increase their return to 7 percent on any donations?
Gary Bogut just received a signing bonus of $1,062,000. His plan is to invest this payment in a fund that will earn 8%, compounded annually. Instead of investing the entire $1,062,000, Bogut invests $278,900 today and plans to make 9 equal annual investments into the fund beginning one year from today. What amount should the payments if Bogut plans to establish the $2,122,938 foundation at the end of 9 years?
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)
The University is given a gift of $500000 for the construction of a School of Management building. The University invests the gift into an account for future use. The University receives 8.00% on the money for 7 years then the rate drops to 6.40%. If the building is constructed 23 years after the gift was received, how much is in the fund at that time? S Do not use dollar signs or commas in your answer. Include two decimals. in your answer.
. James decided to fund a school in Orange County in perpetuity. The first payment will be made three years from today (at the end of year three) and will be $5,320. Each year after that, the school will receive payment from James annually. The payment will increase at a rate of 3% per year after the first payment. If the annual interest rate is 9%, what is the present value of this endowment?
In a family members will, they would like to establish a perpetual trust to provide for the maintenance of a school's learning lab. If the annual maintenance is fixed at $12,500 per year and the trust can earn 5% interest, how much money must be set aside in the trust?
Mr. Crabapple wants to donate money now for an account that will allow a favored charity to make $17,000 withdrawals at the end of each of years 19 to 44. How much should he contribute today if investment managers Dogwood Associates expect to earn returns averaging 4.3% per year on the charity's foundation account? (This is a 26-year deferred annuity, with $17,000 to be paid out at the end of each of years 19 to 44.) A. $128,584.54 B. $115,644.17 C $263,040.12 D. $123,283.36 E. $156,230.80
William wants to establish a scholarship fund at his former university. He would like the recipients to receive an annual $5300 award starting next year. He would like to fund 10 years of these awards. Assuming the university can earn 11% on their donated funds, how much of a donation must William make today to fund the scholarships? $31212.92 $36512.92 $88626.65 $53000.00
2. An endowed scholarship is one funded by a single deposit in a permanent scholarship account by a successful alum. The endowment deposit amount remains untouched and unchanged in the scholarship account. The interest accumulated each year is taken out and paid to a deserving student at the end of each year in a scholarship award. If an endowment earns 3.25% annual interest compounded monthly, a. What is the effective interest rate? b. What would the annual scholarship award be if the amount of the endowment was $300,000?

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