$2,000 scholarship to the student with the top marks each year. Money earns 7% annually. How...

Question

Question

$2,000 scholarship to the student with the top marks each year. Money earns 7% annually. How much money do they need to raise to endow the fund?

business finance

Answer 1

Answer #1

IT IS A CASE OF PERPETUITY.

PRESENT VALUE OF PERPETUAL CASH FLOW = ANNUAL AMOUNT / ANNUAL RATE

AMOUNT NEED TO BE RAISED = AMOUNT OF SCHOLARSHIP/ RATE = 2000 / 0.07 = 28571.43

Answer : 28571.43 (Thumbs up please)

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Answer 2

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