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QUESTION 5 Five years ago, an alumnus of a university donated $55,996
QUESTION 5 Five years ago, an alumnus of a university donated $55,996.8 to establish a permanent endowment for scholarships. The first scholarships were awarded 1 year after the contribution. If the amount awarded each year, that is, the interest on the endowment, is $4,017.55, the rate of return earned on the fund is closest to:
Expert Solution
The scholarships are awarded every year from the interest earned on the donation of $55,996.8
Interest earned = Interest rate * endowment sum on which interest is earned
4017.55 = Interest rate * 55,996.8
Interest Rate = 4017.55/55996.8
Interest Rate = 0.0717 or 7.17%
This the rate of return is 7.17%
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