You have $400 comma 000 to donate to your college. You want to endow a perpetual scholarship that makes its first payment in one year. If the college's discount rate is 6 %, how large will the annual scholarship payment be?

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18 October, 10:48

You have $400 comma 000 to donate to your college. You want to endow a perpetual scholarship that makes its first payment in one year. If the college's discount rate is 6 %, how large will the annual scholarship payment be?

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Xzavier Estes · Answer 1

Answer: The annual scholarship payment will be $24,000.00

Explanation: Perpetuity refers to a bond or other security with no fixed maturity date.

Using the donation of $400,000 at the discount rate of 6%. The annual scholarship will be the donated amount multiplied by the discount rate.

That is, $400,000 * 0.06 = $24,000.00

Therefore, the annual scholarship payment will ne $24,000.00