3. (15 pts) A permanent scholarship fund has been established through a donation of $500,000 at time zero, $100,000 in year one, $150,000 in year two, and amounts increasing by $50,000 per year through year ten. At an interest rate of 10% per year, the amount that could be withdrawn forever beginning in year 11 is nearest: A) $225,903 B) $385,931 C) $585,931 D) $2,259,000

3. (15 pts) A permanent scholarship fund has been established through a donation of $500,000 at time zero, $100,000 in year one, $150,000 in year two, and amounts increasing by $50,000 per year through year ten. At an interest rate of 10% per year, the amount that could be withdrawn forever beginning in year 11 is nearest: A) $225,903 B) $385,931 C) $585,931 D) $2,259,000

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

ChapterA: Appendix - Time Value Of Cash Flows: Compound Interest Concepts And Applications

Section: Chapter Questions

Problem 23E

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8. An education fund will offer a P40, 000 annual scholarship for the first five years, a P60, 000 scholarship for the next five years, and a P90, 000 scholarship after that. One year before the first scholarship is given out, the fund will be established. Interest is paid on the fund at a rate of 4 1/2 percent. a. What sum of money must be deposited now? b. What is the amount left in the fund after fifth P40, 000 was withdrawn? c. What is the amount left in the fund after the fourth P60, 000 was withdrawn?
(3) Suppose $40,000 was invested on January 1, 1980 at an annual effective in- terest rate of 7% in order to provide an annual (calendar-year) scholarship of $5,000 each year forever, the scholarships paid out each January 1. (b) What smaller scholarship can be awarded the year prior to the first $5,000 scholarship?
3. A donor wishes to endow a scholarship to a certain university in the name of a certain professor. The scholarship is to provide $50000 per year for the first 8 years and starting 11 years from now $200000 every 3 years (forever). If the university expects to be able to earn a nominal interest of 16% per year compounded continuously on the endowment, how much must the donor give now if the first scholarship is to be given 1 year from now?
An endowment fund is providing an annual scholarship of P50,000 for the first five years, P60,000 for the next five years, and P90,000 thereafter. The fund will be established today and will award the first scholarship after a year. The fund earns 4.5 % annual interest. Find the present worth of this cost. P1,674,819 P1,852,321 P1,458,214 P2,025,241
6.17 A permanent endowment at the University of Alabama is to award scholarships to engineering students two times per year (end of June and end of December). The first awards are to be made beginning 5-1/2 years after the $20 million lump- sum donation is made. If the interest from the endowment is to fund 100 students each semester (i.e., twice a year) in the amount of $5000 each semester, what semiannual rate of return must the endowment fund earn? 6.18 Identify three possible difficulties with rate of return analyses compared to PW, AW, or FW analyses.
MetaYou have accumulated $8,000 toward the down payment on a piece of lake front property in rural Minnesota. You wish to accumulate a total of $12,000 (i.e. an additional $4,000) for the down payment in four years. If you choose not to contribute more new funds to your down payment fund, what rate of return must your fund earn to reach your objective in the specified time? Assume that your investment fund compounds annually. Question 7Select one: a . 10.67% per year b. 50.00% per year c. 12.50% per year d. There is not enough information to answer this question.
Deakin University wants to establish a trust fund that will provide a perpetual annual scholarship of $15 000. It can invest the money at 11% per annum compounding. How much do they need to invest? Select one: a. $136 363.64 b. $140 500.50 c. $125 506.35 d. $130 340.75
(1) Five years ago, an alumnus of a university donated $55,996.8 to establish a permanent endowment for scholarships. The first scholarships were awarded 1 year after the contribution. If the amount awarded each year, that is, the interest on the endowment, is $4,017.55, the rate of return earned on the fund is closest to: (2) For the nonconventional net cash flow series shown, the external rate of return per year using the MIRR method, with an investment rate of 20% per year and a borrowing rate of 8% per year, is closest to: Year 0 1 2 3 4 NCF, $ −40,000 +16,767 −29,000 +25,000 +53,519 According to Descartes’ rule of signs, the possible number of rate of return values for the net cash flow series ++++−−−−−−+−+−−−++ is: 6 7 4 8
(b) As an added benefit to staff, Insignia intends to start a Trust Fund to assist the children of its employees with university tuition via scholarships. The intention of the company is to assist 4 different students annually with a $10,000 grant each. The grant is expected to be increased by 5% annually and provide scholarships indefinitely. Required: i. Assuming this fund will earn 10% interest per annum, calculate the value of the fund today. ii. Insignia decides to fund this amount (calculated in (i)) via monthly deposits over the next 12 months in an enhanced savings account, after which the scholarships will begin. Assuming a return of 12%, compounded monthly, how much would Insignia need to deposit monthly over the next year, to achieve this goal? ii. Compute the effective annual rate on this enhanced savings account.
Kwantlen Polytechnic University received a semi-annual donation of $50,000 per year for the next fifteen years, with the first payment being received today. Given a discount rate of 5.5% compounding semi-annually, determine the present value of the donation. Select one: a. $529,482 b. $1,012,465 x c. $1,040,308 d. $1,500,000
A foundation supports an annual campus seminar by using the earnings of a $50,000 gift. It is felt that 10% interest will be realized for 10 years but that plans should be made to anticipate an interest rate of 6% after that time. What uniform annual payment may be established from the beginning, to fund the seminar at the same level into infinity?
Comprehensive The following are three independent situations: 1. K. Herrmann has decided to set up a scholarship fund for students. She is willing to deposit 5,000 in a trust fund at the end of each year for 10 years. She wants the trust fund to then pay annual scholarships at the end of each year for 30 years. 2. Charles Jordy is planning to save for his retirement. He has decided that he can save 3,000 at the end of each year for the next 10 years, 5,000 at the end of each year for Years 11 through 20, and 10,000 at the end of each year for Years 21 through 30. 3. Patricia Karpas has 200,000 in savings on the day she retires. She intends to spend 2,000 per month traveling around the world for the next 2 years, during which time her savings will earn 18%, compounded monthly. For the next 5 years, she intends to spend 6,000 every 6 months, during which time her savings will earn 12%, compounded semiannually. For the rest of her life expectancy of 15 years, she wants an annuity to cover her living costs. During this period, her savings will earn 10% compounded annually. Assume that all payments occur at the end of each period. Required: 1. In Situation 1, how much will the annual scholarships be if the fund can earn 6%? How much at 10%? 2. In Situation 2, (a) How much will Charles have at the end of 30 years if his savings can earn 10%? How much at 6%? (b) If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 10%? How much at 6%? (c) How much would Charles need to invest today to have the same amount available at the time he retires as calculated in Situation 2(a) at 10%? How much at 6%? 3. In Situation 3, how much will Patricias annuity be?