Question
11. You do not have children yourself and therefore you decide to create an endowment to pay out annual study grants to bright children from
11. You do not have children yourself and therefore you decide to create an endowment to pay out annual study grants to bright children from less fortunate families. The endowment takes the form of a perpetual savings account with interest rate of 5% (annualized). Every year you would like the endowment to pay out an amount of study grants starting next year with 50,000. You would like the total sum of study grants to nominally grow with 2% annually to compensate for inflation. The required endowment to guarantee these future cash outflows comes closest to:
A) 1,500,000 B) 1,600,000 C) 1,700,000 D) 1,800,000 Ans: C
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