You would like to establish a trust fund that would provide annual scholarships of $100,000 today and then grow at 2.0% forever (i.e. at time 1 there will be a $102,000 scholarship award). How much would you have to deposit today in one lump sum to achieve this goal if you can earn a guaranteed 7.0 percent rate of return? 2,140,000 2,355,556

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
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You would like to establish a trust fund that would provide annual
scholarships of $100,000 today and then grow at 2.0% forever (i.e.
at time 1 there will be a $102,000 scholarship award). How much
would you have to deposit today in one lump sum to achieve this
goal if you can earn a guaranteed 7.0 percent rate of return?
2,140,000
2,355,556
1,945,455
2,650,000
Transcribed Image Text:You would like to establish a trust fund that would provide annual scholarships of $100,000 today and then grow at 2.0% forever (i.e. at time 1 there will be a $102,000 scholarship award). How much would you have to deposit today in one lump sum to achieve this goal if you can earn a guaranteed 7.0 percent rate of return? 2,140,000 2,355,556 1,945,455 2,650,000
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