Say that you want to establish a scholarship fund that will make fixed payments forever. To fund thescholarship, you plan to make 12 annual contributions of $9.9k to an investment account with an expectedreturn of 6.0% interest annually. Your first contribution occurs today. If the scholarship fund makes its firstpayment two years following the last contribution, then what is the fixed annual payment that thescholarship fund will award? (Round to the nearest dollar)

This is case of future value of annuity due. In annuity due equal periodic payments are made at the…

Answered: Say that you want to establish a…

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 fund is to be created which pays out a scholarship of £7,000 every year in perpetuity. The first scholarship will be paid out in 8 years' time. Assuming an interest rate of 7%, how much should be paid into the fund?
You expect to receive a one-time payment of $1,000 in 10 years and a second payment of $1,500 in 15 years. The annual interest rate is 3%. If you invest the amount that you'll receive in 10 years, how much money will you have in year 15 (including the cash flow in year 15)?
A scholarship fund is to be set up to provide monthly scholarships of $600. If the first payment is due in 3.0 years and interest is 6.0% compounded quarterly, what sum of money must be deposited in the scholarship fund today?
You will endow a DePaul scholarship with a grant gift stream that lasts forever. The first grant is to be made 10 years from now in the amount of $1,303.14, but it must grow by 3% per year forever. Assume a discount rate of 9% and annual compounding. How much must you set aside today to fund the gift?
You are offered an annuity that will pay $10,000 a year for ten years (that is, ten payments), but the payments start after five years have elapsed. If you want to earn 8 percent on your funds, what is the maximum you should pay for this annuity? Show formula and all working
Computing the Future Value of an Annuity Stone will deposit $8,250 at the beginning of each year for 10 years in a fund that earns 5%, compounded annually. What is the total amount of the fund at the end of 10 years? Round your answer to the nearest whole number. Do not use a negative sign with your answer. $ Answer
Determine the size of your investment account 23 years from now (when you plan to retire) if you deposit $15,000 each year, beginning 1 year from now, and the account earns interest at a rate of 9% per year. The size of the investment account is $
You would like to have $37,000 in 5 years for the down payment on a new house following college graduation by making deposits at the end of every three months in an annuity that pays 4.25% compounded quarterly. How much should you deposit at the end of every three months? How much of the $37,000 comes from deposits and how much comes from interest?
(Solving for PMT of an annuity) To pay for your child's education, you wish to have accumulated $19,000 at the end of 11 years. To do this you plan on depositing an ←equal amount into the bank at the end of each year. If the bank is willing to pay 15 percent compounded annually, how much must you deposit each year to reach your goal? To reach your goal, your annual deposit must be $ (Round to the nearest cent.)
(Present value of a growing perpetuity) As a result of winning the Gates Energy Innovation Award, you are awarded a growing perpetuity. The first payment will occur in a year and will be for $30,000. You will continue receiving monetary awards annually with each award increasing by 7 percent over the previous award, and these monetary awards will continue forever. If the appropriate interest rate is 12 percent, what is the present value of this award? The present value of the award is $ nearest cent.) (Round to the
The student who wins the math contest will receive a cash prize every year. The source of the prize money is a perpetual annuity that pays 2% interest compounded monthly. The prize money is paid out in fixed amounts each year, starting after one year. If my initial deposit is $2,000, what is the value of the prize? Please round your answer to the nearest cent.
An insurance settlement of $3 million must replace Trixie Eden's income for the next 30 years. What income will this settlement provide at the end of each month if it is invested in an annuity that earns 8.1%, compounded monthly? (a) Decide whether the problem relates to an ordinary annuity or an annuity due. ordinary annuityannuity due (b) Solve the problem. (Round your answer to the nearest cent.) $

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