Susan Would Like to Set Up an Endowment Fund that Would Award

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Endowment Fund

1. Susan would like to set up an endowment fund that would award a student with a scholarship of $500 at the end of each year. The scholarship will continue in perpetuity. The interest rate is 6% compounded semi-annually, and the first award is made one year from today. How much (to the nearest dollar) should Susan invest today? d) $8210 a) $33 582 b) $16 667 c) $8334

2. John makes payments of $200 on a loan. The payments will be made at the beginning of each month starting immediately for three years. Find the present value of the loan if the interest rate is 12% compounded monthly.* Oc) $13654 O d) $12 543 O a) $6022 PO b) $6082

3. Joe has set up an investment to provide a scholarship of $750 at the beginning of each year in perpetuity starting immediately. Find the present value of this perpetuity if the interest rate is 8% compounded annually. * d) $10 125 c) $9375 a) $9200 Ob) $10 000

4. It is desired to invest $25 000 to provide for a scholarship at the end of each year in perpetuity. The interest rate is 5% compounded annually. The first scholarship will be awarded one year from today. Find the size of the annual scholarship. c) $1250 b) $2500 d) $1520 O a) $3200

5. Sally has invested $18 000 (single deposit) in an annuity that will start making payments to her in four years. After four years she will receive a monthly payment at the end of every month for 15 years. The interest rate is 6% compounded monthly. What will be the value in her account at the end of four years? a) $36 220 O d) $300 000 b) $22 869 c) $973 761 6. Carlos deposits $350 at the end of each month to save for his retirement. His money earns 4.2% compounded quarterly. How much money will Carlos have in 10 years’ time? * c. $18 258.97 O d. $14 995.63 O a $52 044.36 O b. $52 084.59

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