wealthy man donated a certain amount of money in a bank at a rate of 8% compounded annually to be able to pay the following scholarship awards: P4000 per yr for the first 5yrs P6000 per yr on the next 3yrs P8000 per yr on the years thereafter. Find the amount of money deposited by the ma

wealthy man donated a certain amount of money in a bank at a rate of 8% compounded annually to be able to pay the following scholarship awards: P4000 per yr for the first 5yrs P6000 per yr on the next 3yrs P8000 per yr on the years thereafter. Find the amount of money deposited by the ma

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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A wealthy man donated a certain amount of money in a bank at a rate of 8% compounded annually to be able to pay the following scholarship awards:

P4000 per yr for the first 5yrs

P6000 per yr on the next 3yrs

P8000 per yr on the years thereafter.
Find the amount of money deposited by the man.

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THIS QUESTION HAS TWO PARTS After a retiring from a successful business career, you would like to make a donation to your university. This donation will go into the school's endowment pool and the returns generated from the donation will support the salary of a new professor in the business school on a perpetual basis. The university expects to earn returns of 5.5% on its endowment pool. You may assume that any distributions to support the salary will be made annually. Part A) You can make a donation today (t=0) in the amount of $2,500,000. The first cash flow distribution from your donation to cover the professor's salary will take place in one year (at t=1). Which of the following is closest to the annual salary payment that can be made as a result of your donation? A. $137,500 B. $454,545 C. $2,500,000 D. $100,000 Part B) After further discussions, the university determines that the employment agreement with the new professor will call for annual salary increases of 2%. Given this…
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