You have decided to endow your favorite university with a scholarship. It is expected to cost $15,000 per year to attend the university into perpetuity. You expect to give the university the endowment in 5 years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be 8% for all future time periods. a) How large must the endowment be? b) How much must you deposit at the end of each of the next 5 years to accumulate the required amount?
You have decided to endow your favorite university with a scholarship. It is expected to cost $15,000 per year to attend the university into perpetuity. You expect to give the university the endowment in 5 years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be 8% for all future time periods. a) How large must the endowment be? b) How much must you deposit at the end of each of the next 5 years to accumulate the required amount?
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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Question
You have decided to endow your favorite university with a scholarship.
It is expected to cost $15,000 per year to attend the university into
perpetuity. You expect to give the university the endowment in 5 years
and will accumulate it by making equal annual (end-of-year) deposits
into an account.
The rate of interest is expected to be 8% for all future time periods.
a) How large must the endowment be?
b) How much must you deposit at the end of each of the next 5 years
to accumulate the required amount?
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