How much would you need to gift to the university today to establish a scholarship fund...

How much would you need to gift to the university today to establish a scholarship fund that pays out $10000 in scholarships in one year and grows the scholarship payout by 1% per year? Assume that the university endowment earns 8% per year on its investments.

Expert Solution

r = Rate of return	8%
g = Growth rate	1%

Amount of gift = Future annuity / (r-g) = 10000 / (8%-1%) =	142857.14

jeff jeffy answered 2 years ago

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