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Homework answers / question archive / Alexa, a retired librarian, would like to donate some money to her alma mater to endow a $7000 annual scholarship, The first scholarship will be awarded in 5 years The university will manage the funds and expects to earn 5 percent per year

Alexa, a retired librarian, would like to donate some money to her alma mater to endow a $7000 annual scholarship, The first scholarship will be awarded in 5 years The university will manage the funds and expects to earn 5 percent per year

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Alexa, a retired librarian, would like to donate some money to her alma mater to endow a $7000 annual scholarship, The first scholarship will be awarded in 5 years The university will manage the funds and expects to earn 5 percent per year. How much will Alexa have to donate so that the endowment fund never runs out?

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Amount at the end of four years = ( Annual Scholarship / rate of return )

=( $ 7000 / 0.05 )

= $ 140000

 

Donate money is as follows;

= $ 140000 / 1.05^(5-1)

=  $115,178.35 

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