Year 1: $100,000,000 endowment

5% rule allows $5,000,000 to be spent

90% of annual earnings allows $9,000,000 to be spent.

Must choose lower of these.

Therefore, allowed to spend $5,000,000.

$4,000,000 added to principal amount

Questions:

a. What is the beginning endowment amount in year 2?

b. Given the universitys rules, how much is available to spend in year 2? c. What is the ending endowment amount for year 2?