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Inessa05 [86]
3 years ago
9

An alumnus of West Virginia University wishes to start an endowment that will provide scholarship money of $40,000 per year begi

nning in year 5 and continuing indefinitely. The donor plans to give money now and for each of the next 2 years. If the size of each donation is exactly the same, the amount that must be donated each year at i = 8% per year is closest to:___.
a) $190.820.
b) $122.280.
c) $127.460.
d) $132.040.
Business
1 answer:
olga55 [171]3 years ago
3 0

Answer:

A

Explanation:

Present value of a  perpetuality = amount / interest rate

= $40,000 / 0.08 = $500,000

Let D denote denote denotions

D + \frac{D}{1 + 0.8}  + \frac{D}{1.08^{2} } = $500,000

D = $190.820.

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What is the reason why people want something that is scarce?
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