Question

Suppose you decide to provide a charitable endowment that must pay $400,000 (assume an end of...

Suppose you decide to provide a charitable endowment that must pay $400,000 (assume an end of year lump sum payout). Your charity believes it can earn a return of 4.25% annually on the endowment. Using the formula approach, determine both of the following

a) How much would you would need to donate to fund this payout in perpetuity if the payout starts this year?

b) How much would you would need to donate to fund this payout in perpetuity if the payout starts ten years from now?

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