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14 April, 18:25

Assume your university earns an average rate of return of 5.65 percent on its endowment funds. If a new gift permanently increases annual scholarships by $32,000, what was the amount of the gift?

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  1. 14 April, 18:35
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    The amount of the gift is 566,371.6814

    Explanation:

    Average rate of return = Average net profit / average investment

    Average rate of return = 5.65% (5.65/100 = 0.0565)

    average net profit = 32000

    average investment = unknown

    to calculate the amount of the gift which is investment in this case the same formula for Average rate of return will be used i. e

    Average rate of return = Average net profit / average investment

    0.0565 = 32, 000 / x

    cross multiply

    0.0565 x = 32,000

    divide both sides by 0.0565

    x = 32,000/0.0565

    32,000 / 0.0565 = x

    x = 566,371.6814

    The amount of the gift is 566,371.6814
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