Question 4 1 pts St Louis University (SLU) is soliciting donations to fund a $10

Question

Question 4 1 pts St Louis University (SLU) is soliciting donations to fund a $100,000-per-year perpetual professorship. The current available interest rate on SLU's money is 4% pa. Determine the amount of funds SLU needs today to fund the professorship. (Hint: SLU must pay $100,000/year to the professor occupying that professorship) [Write your answer in milins of dollrs with one decimal. Note that the decimal will be the hundreds of thousands of dollars Remove the six zeros 000,000 and the $ sign.]

Explanation / Answer

To pay $100,000 after 1 year we need an amount x today such that after adding 4% interest on x we get $100,000 as the amount.

equation: x + 4%of x= 100,000

(104/100)* x=100,000

x= 100,000*(100/104) = $ 96,153.85

So this amount would be 100,000 after 1 year .

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