You want to endow a scholarship that will pay $ 8000 per year forever, starting one...
You want to endow a scholarship that will pay $ 8000 per year forever, starting one year from now. If the school's endowment discount rate is 4 %, what amount must you donate to endow the scholarship?
Homework Answers
Present value of perpetuity=Annual cash flows/discount rate
=$8000/0.04
which is equal to
=$200,000.
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