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You just won the lottery, and you want to endow a professorship at your alma mater. You are willing to donate $4 million of your
You just won the lottery, and you want to endow a professorship at your alma mater. You are willing to donate $4 million of your winnings for this purpose. Assume that the university earns 5% per year on its investments, and the professor will be receiving her first payment in one year. The inflation rate is expected to be 2% per year. How much can the professor be paid in the first year in order to allow her annual salary to increase by 2% each year and keep the principal intact
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