Question

Imari wants to establish a charitable foundation that will make annual scholarship payments forever. Imari wants the foundation to make the first annual scholarship payment in 4 years from today, she wants that first scholarship payment to be 22,410 dollars, and she wants annual scholarship payments to increase by 3.79 percent per year forever. To fund the foundation, Imari plans to make equal annual savings contributions for 3 years. How much does Imari need to save each year for 3 years to have exactly enough in the foundation to meet her goal if she makes her first savings contribution later today, all savings contributions are equal, and her expected return is 10.7 percent per year?

Please show your work.

Answer 1

Amount to be saved each year=22410/1.107^4*1/(1-(1.0379/1.107))*10.7%/(1-1/1.107^3)*1/1.107=$87,912.91