please do both a and b Deposits to create a perpetuity Personal Finance Problem
ID: 2658383 • Letter: P
Question
please do both a and b
Deposits to create a perpetuity Personal Finance Problem You have decided to endow your favorite university with a scholarship. It is expected to cost $4,000 per year to attend the university into perpetuity You expect to give the university the endowment in 12 years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be 11% for all future time periods. a. How large must the endowment be? b. How much must you deposit at the end of each of the next 12 years to accumulate the required amount?Explanation / Answer
a. the value of the endowment should be = 4000/0.11 = 36,363.36
b. N = 12, FV = 36,363.36, PV = 0, rate = 11%
use PMT function in Excel
annual payments = 1,600.99
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