Peter Fond, a wealthy alumnus of a university, decided to create an endowment. The endowment is to allow four indigent students to take one management course each year in perpetuity. The annual cost of the course is $700 per student. To create the endowment, a a single payment will be made to the university. The university expects to earn exactly 7% per year on these funds. Required: How large an initial single payment must Peter Fond make to the university to fund the endowment? What amount would be needed to fund the endowment if the university could earn 8% rather than 7% per year on the funds?
Peter Fond, a wealthy alumnus of a university, decided to create an endowment. The endowment is to allow four indigent students to take one management course each year in perpetuity. The annual cost of the course is $700 per student. To create the endowment, a a single payment will be made to the university. The university expects to earn exactly 7% per year on these funds. Required: How large an initial single payment must Peter Fond make to the university to fund the endowment? What amount would be needed to fund the endowment if the university could earn 8% rather than 7% per year on the funds?
Advanced Engineering Mathematics
10th Edition
ISBN:9780470458365
Author:Erwin Kreyszig
Publisher:Erwin Kreyszig
Chapter2: Second-order Linear Odes
Section: Chapter Questions
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Problem 11: Creating an Endowment
Peter Fond, a wealthy alumnus of a university, decided to create an endowment. The
endowment is to allow four indigent students to take one management course each year in
perpetuity. The annual cost of the course is $700 per student. To create the endowment, a
a single payment will be made to the university. The university expects to earn exactly 7% per
year on these funds.
Required:
- How large an initial single payment must Peter Fond make to the university to fund the
endowment?
- What amount would be needed to fund the endowment if the university could earn 8%
rather than 7% per year on the funds?
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