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12 June, 18:02

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

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  1. 12 June, 21:56
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    Present Value = $4,716.98

    Explanation:

    Giving the following information:

    You would like the total annual award to be $5,000, with the first award to be presented next year. Your alma mater can invest the funds at a constant, annual, tax-free rate of 8%

    We need to use the following formula:

    PV = FV / (1+i) ^n

    PV = 5,000/1.06 = $4,716.98
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