You want to endow a scholarship now that will pay $12,000 per year forever, starting the first award 10 years from now. If the school's endowment discount rate is 8%, what amount must you donatetoday to endow the scholarship?The amount you must donate today to endow the scholarship is $(Round to the nearest cent.)

An annuity is a series of periodic payments provided in exchange for a lump sum payment. It is…

Answered: You want to endow a scholarship now…

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 22E

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Comprehensive The following are three independent situations: 1. K. Herrmann has decided to set up a scholarship fund for students. She is willing to deposit 5,000 in a trust fund at the end of each year for 10 years. She wants the trust fund to then pay annual scholarships at the end of each year for 30 years. 2. Charles Jordy is planning to save for his retirement. He has decided that he can save 3,000 at the end of each year for the next 10 years, 5,000 at the end of each year for Years 11 through 20, and 10,000 at the end of each year for Years 21 through 30. 3. Patricia Karpas has 200,000 in savings on the day she retires. She intends to spend 2,000 per month traveling around the world for the next 2 years, during which time her savings will earn 18%, compounded monthly. For the next 5 years, she intends to spend 6,000 every 6 months, during which time her savings will earn 12%, compounded semiannually. For the rest of her life expectancy of 15 years, she wants an annuity to cover her living costs. During this period, her savings will earn 10% compounded annually. Assume that all payments occur at the end of each period. Required: 1. In Situation 1, how much will the annual scholarships be if the fund can earn 6%? How much at 10%? 2. In Situation 2, (a) How much will Charles have at the end of 30 years if his savings can earn 10%? How much at 6%? (b) If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 10%? How much at 6%? (c) How much would Charles need to invest today to have the same amount available at the time he retires as calculated in Situation 2(a) at 10%? How much at 6%? 3. In Situation 3, how much will Patricias annuity be?
You want to endow a scholarship that will pay $11,000-per year forever, starting one year from now. If the school's endowment discount rate is 9%, what amount must you donate to endow the scholarship? The amount you must donate is $_______. (Round to the nearest cent.)
You want to endow a scholarship that will pay $11,000 per year forever, starting one year from now. If the school’s endowment discount rate is 6%, what amount must you donate to endow the scholarship?
You want to endow a scholarship that will pay $12,000 per year forever, starting one year from now. If the school's endowment discount rate is 5%, what amount must you donate to endow the scholarship?
You want to endow a scholarship that will pay $ 8 comma 000$8,000 per year forever, starting one year from now. If the school's endowment discount rate is 4 %4%, what amount must you donate to endow the scholarship? How would your answer change if you endow it now, but it makes the first award to a student 10 years from today?
You plan to set up an endowment at your alma mater that will fund $180,000 of scholarships each year indefinitely. If the principal (the amount you donate) can be invested at 6.4 percent, compounded annually, how much do you need to donate to the university today, so that the first scholarships can be awarded beginning one year from now? (Round answer to 2 decimal places, e.g. 52.75.)
You will endow a DePaul scholarship with a grant gift stream that lasts forever. The first grant is to be made 10 years from now in the amount of $1,303.14, but it must grow by 3% per year forever. Assume a discount rate of 9% and annual compounding. How much must you set aside today to fund the gift?
To benefit the ISU College of Business, Bill Vickers would like to establish a “perpetual” scholarship fund that will pay for MBA tuition and fees worth $210,000 per year. The fund’s first payment to ISU will be issued exactly 13 years from today. If the scholarship fund earns an annual return of 4.1 percent, how much must Mr. Vickers deposit today to establish it?
You donate $400,000 to provide annual scholarships in perpetuity. The money is deposited into an investment which pays 9% compounded monthly. What size annual scholarship can be awarded if the first scholarship will be awarded in one year?
You are head of the Schwartz Family Endowment for the Arts. You have decided to fund an arts school in the San Francisco Bay area in perpetuity. Every 3 years, you will give the school $ 900,000. The first payment will occur 3 years from today. If the interest rate is 11.2% per year, what is the present value of your gift? The PV of the gift is ?
You have had plenty of success in your career so you decide to make a donation to Nichols that will result in an annual scholarship of $1,000. This scholarship will continue forever. If the discount rate is 4.8% compounded annually, what amount will you have to donate?
10. Mr. Smart wants to set up an annual scholarship by donating $50 000 to the scholarship fund of his university. If the first payment is to be made in 5 years and interest is 4% compounded annually, what is the amount of the annual scholarship?

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