**Text Transcription:**Y University received a contribution to its endowment fund of $5 million. It can never touch the principal but can use the earnings. At an interest rate of 5 percent, how much can the college earn to help its operations each year?**Explanation:**This passage describes a scenario where Y University has received a donation or contribution to its endowment fund. The principal amount of this fund is $5 million, and it cannot be used for expenses. However, the university can utilize the earnings generated from this fund to support its operations.To determine how much the university can earn annually, the interest rate is given as 5 percent. Thus, the earnings per year can be calculated by taking 5 percent of the $5 million principal.Calculation:- Earnings per year = 5% of $5 million- Earnings per year = 0.05 * $5,000,000- Earnings per year = $250,000Therefore, Y University can earn $250,000 annually from this endowment fund to support its operations.

Principal contribution (P) = $5,000,000Interest rate (r) = 0.05Annual earnings = ?This is the…

Answered: Y University received a contribution to…

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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Y University received a contribution to its endowment fund of $ 5 million. It can never touch the principal but can use the earnings. At an interest rate of 5 percent, how much can the college earn to help its operations each year?