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?

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