Question

A donor gives $10,000 to a university, and specifies that it is to be used to give annual scholarships for the next 15 years. If the university can earn 4% interest, how much can they give in scholarships each year

Answer 1

r= 4%

n= 15

P = 10,000

Using ,Payout annuity formula :

P = d( 1- ( 1+r%) ^-n) /4%

10,000 = d ( 1- (1+4%) ^-15 ) 4%

d= 899. 41

They give $899.41 in scholarships each year