Question

George Jefferson established a trust fund that provides $170,500 in scholarships each year for worthy students. The trust fund earns a 4 percent rate of return. How much money did Mr. Jefferson contribute to the fund assuming that only the interest income is distributed?

Answer 1

Answer:

The answer is: Mr. Jefferson contributed $4,262,500 to the trust fund

Explanation:

Assuming that the interests earnings equal the funds provided for scholarships per year, we work with the following equation:

total trust fund = annual interest income / rate of return

                        = $170,500 / 4%

                        = $4,262,500

So the total amount of money Mr. Jefferson contributed to the trust fund is $4,262,500.

Answer 2

The returns of a capital amount to a compensation rate for depositing the money, to calculate these returns an interest rate is used by which the deposited capital is multiplied, in this case the rate is 4%.

As the money distributed is only the product of interest, then that money is the result of multiplying the capital by the interest rate, to obtain how much money Mr. Jefferson contributed, the reverse process will have to be done.

Answers

let C be the capital, then :

$C\times4 \% = 170500\\C\times\frac{4}{100}= 170500\\C=170500\times\frac{100}{4}\\C=4262500$

The capital contributed by Mr. Jefferson was $4,262,500