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I got help from two different people but they got different answers. One calculated real rate and the other did growing annuity. The problem says
I got help from two different people but they got different answers. One calculated real rate and the other did growing annuity. The problem says rate of inflation of 3%) but Im not sure if I should use it as an inflation rate or a growth rate... And if I have to use it as inflation rate, how do you solve part a and b??
As a future graduate of the University of Minnesota's prestigious Carlson School of Management, someday you would like to endow a scholarship (meaning give the university money in your name) to pay for tuition expenses for future CSOM students. Assume you just graduated (congratulations!). You plan to work for fifteen years after graduation before endowing this scholarship (at the end of the fifteenth year AFTER graduation). Annual tuition at UMN is $10,000 today, and is expected to grow at the long term average rate of inflation of 3% per year forever. Savings is expected to earn a return of 7% per year forever. 3
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