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3. There is a charitable trust that helps orphans in war-torn regions. a. The fund is endowed with $2.5 million. At 4% EAR, how large
3. There is a charitable trust that helps orphans in war-torn regions. a. The fund is endowed with $2.5 million. At 4% EAR, how large is the amount of aid the fund can disburse each year, if it wants to disburse the same amount every year in perpetuity? b. Suppose the fund pays out $100,000 in its first year and would like the disbursed aid amount to grow by 2% every year thereafter. At 4% EAR, how large would its endowment have to be? 4. Consider a risky investment project that yields two future cash flows that have the following expected values: $20,000 in 2 years and $40,000 in 3 years. Suppose the risk-free rate is 49 APR semi-annual and the risk premium for this type of investment is 2% APR semi-annual. What is the present value of the expected cash flow stream
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