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George Jefferson established a trust fund that will provide $173,500 per year in scholarships. The trust...

George Jefferson established a trust fund that will provide $173,500 per year in scholarships. The trust fund earns an annual return of 2.2 percent. How much money did Mr. Jefferson contribute to the fund assuming that only income is distributed?

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Expert Solution

Amount needed to be contributed is present value of schlorships

Pv of perpetuity = Cashflow/required rate

= 173500/0.022 = 7886363.63

So jefferson need to contribute 7886363.63 today

jeff jeffy answered 2 years ago
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