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29 November, 07:47

You are establishing a fund that pays $1,000 annual scholarship to a student at Bauer Collage of Business starting a year from today, forever. If you can earn 8 percent annual return, how much do you have to put aside to keep this scholarship forever

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  1. 29 November, 10:55
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    How much do you have to put aside to keep this scholarship forever?

    So this is a perpetuity and formula is PV=C/R

    Annual Scholarship = $1,000 (C)

    Annual Interest Rate = 8% (R)

    Present Value of Perpetual Payment = 1000/0.08 = $12,500

    Need to keep aside $12,500 for annual scholarship of $1,000 in perpetuity
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