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15 March, 03:56

You want to endow a scholarship that will pay $ 9 comma 000$9,000 per year forever, starting one year from now. if the school's endowment discount rate is 10 %10% , what amount must you donate to endow the scholarship?

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  1. 15 March, 05:43
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    The amount that will be needed in 1 year's time for endowment is:

    amount / (rate)

    =9000/0.1

    =$90,000

    Therefore the current amount needed for donation will be given by:

    PV=P (1+r/100) ^-n

    =90000 (1+10/100) ^-1

    =90000/1.1

    =$81,818.2
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