Business, 26.02.2020 05:56 ExclusiveNay

Your grandfather wants to establish a scholarship in his father’s name at a local university and has stipulated that you will administer it. As you’ve committed to fund a $10,000 scholarship every year beginning one year from tomorrow, you’ll want to set aside the money for the scholarship immediately. At tomorrow’s meeting with your grandfather and the bank’s representative, you will need to deposit (rounded to the nearest whole dollar) so that you can fund the scholarship forever—assuming that the account will earn 6.00% per annum every year.

a. $111,111
b. $88,889
c. $100,000
d. $133,333

The bank representative just reported that he misquoted the available interest rate on the scholarship’s account. Your account should earn 4.75%. The amount of your required deposit should be revised to .

a. $60,715
b. $53,572
c. $71,429
d. $67,858

This suggests there is relationship between the interest rate earned on the account and the present value of the perpetuity.

a. A direct
b. An inverse

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Your grandfather wants to establish a scholarship in his father’s name at a local university and has...

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