17. A rich tech company owner does not have children and decides to create an endowment that will pay study loans to poo
Posted: Sun Jun 05, 2022 6:53 am
17. A rich tech company owner does not have children and
decides to create an endowment that will pay study loans to
poor but bright students that study at his former university.
The payments of the study loans start from next year
onwards with an initial amount of $500,000. However, in order
to correct for inflation, this amount will have to grow with
the average long-term inflation rate which equals 2%. Suppose
the endowment's interest rate equals 4% on an annual basis. Which
amount needs to be saved now in the endowment in order to
guarantee these future outflows of study loans?
A) $24,000,000
B) $26,000,000
C) $23,000,000
D) $25,000,000
decides to create an endowment that will pay study loans to
poor but bright students that study at his former university.
The payments of the study loans start from next year
onwards with an initial amount of $500,000. However, in order
to correct for inflation, this amount will have to grow with
the average long-term inflation rate which equals 2%. Suppose
the endowment's interest rate equals 4% on an annual basis. Which
amount needs to be saved now in the endowment in order to
guarantee these future outflows of study loans?
A) $24,000,000
B) $26,000,000
C) $23,000,000
D) $25,000,000