A wealthy donor wishes to endow a Professorship in International Human Rights. If the return on the

endowment is 5% how much must he set aside today to provide the following end-of-year payment

alternatives?

a. $200,000 per year in perpetuity.

b. $200,000 per year for eight years.

c. A perpetuity that pays $200,000 at the end of the first year, growing at 3% per year thereafter.

d. An eight year commitment starting the end of year 1 at $200,000 and growing at 3% per year.

e. What conclusions can be drawn about the amount of money required up front for a "growth" versus

a "no growth" series of payments?