Question

1. What is the present value of annual payments of $11,000 for 18 years at an...

1. What is the present value of annual payments of $11,000 for 18 years at an 8% interest rate?

2. How much do you need to donate to your college if you want to endow a $5000 annual scholarship that will last forever? Assume to endowment earns 6% per year.

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Answer #1

Ans 1) $ 103090.76

Ans 2) $ 83333.33

Value of Donation = Periodic Payments / rate of interest

                         = 5000 / 6%

                          = $ 83333.33

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