Present value of Perpetuity
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FIVE YEARS AGO, AN ALUMNUS OF A SMALL UNIVERSITY DONATED $50,000 TO ESTABLISH A PERMANENT ENDOWMENT FOR SCHOLARSHIPS. THE FIRST SCHOLARSHIPS WERE AWARDED 5 YEARS AFTER THE MONEY WAS DONATED. IF THE AMOUNT AWARDED EACH YEAR (IE:, THE INTEREST) IS $5OOO, THE RATE OF RETURN EARNED ON THE FUND IS CLOSEST TO?
A. 7.5% PER YEAR
B. 10% PER YEAR
C. 11% PER YEAR
D. 14% PER YEAR
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Solution Summary
This explains how to calculate the present value of perpetuity.
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