You would like to establish a fund that will be used to offer a scholarship each year to a worthy student at your almamater. You would like the total annual award to be $5,000, with the first award to be presented today. Your alma mater isable to invest the funds at a constant, annual, tax - free rate of 8%. How much must you donate today to fund thisaward? Round your answer to the nearest dollar. You would like to establish a fund that will be used to offer ascholarship each year to a worthy student at your alma mater. You would like the total annual award to be $5,000, withthe first award to be presented today. Your alma mater is able to invest the funds at a constant, annual, tax - free rate of8%. How much must you donate today to fund this award? Round your answer to the nearest dollar. $67, 500 $51,296$46,296 $62, 500

Present value refers to the discounted value of the future cash flow. These future cash flows are…

Answered: You would like to establish a fund that…

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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As a future graduate of the University of Minnesota, someday you would like to endow a scholarship (meaning give the university money in your name) to pay for tuition expenses for future UMN students. Assume you just graduated (congratulations!). You plan to work for fifteen years after graduation before endowing this scholarship (at the end of the fifteenth year AFTER graduation). Annual tuition at UMN is $10,000 today, and is expected to grow at the long-term average rate of inflation of 3% per year forever. Savings are expected to earn a return of 7% per year forever. a) The first tuition payment is due one year after the scholarship is endowed. How much will the tuition be when your scholarship makes the first payment? b) You would like the scholarship to pay all tuition for one student per year for the twenty years following the creation of the endowment, how much money do you need to endow the scholarship? c)If you would like the scholarship to pay for tuition for one student…
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