Question
A wealthy graduate of a local university wants to fund a scholarship to help future students to cover the full cost of one student each
A wealthy graduate of a local university wants to fund a scholarship to help future students to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the scholarship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $45,000 and is expected to stay constant in real terms in real terms in the future. If this scholarship fund is to be invested to earn an annual real return of 5 percent, how much must the donor contribute to fully fund the scholarship ?
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