Question

show work please

olve the problem. 25) The Finance Club would like to endow an annual prize of $150 to the student who shows the most promise as a future stockbroker. The club is confident that it can invest indefinitely at an interest rate of at least 5% a year. How much does the club need to endow its prize? A) $300 C) $158 B) $3000 D) $3150 150l It.005)

Answer 1

The correct answer is option B

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The present value of the annual payment in perpetuity represents the amount that needs to be set aside.

Annual payment Present value of perpetuity =-

$150 PV = 0.05

PV = $ 3000

The club needs $ 3000 to endow the prize.