Deposits to create a perpetuity Personal Finance ProblemYou have decided to endo

Question

Deposits to create a perpetuityPersonal Finance ProblemYou have decided to endow your favorite university with a scholarship. It is expected to cost

$7 comma 0007,000

per year to attend the university into perpetuity. You expect to give the university the endowment in

1515

years and will accumulate it by making equal annual (end-of-year) deposits into an account. The rate of interest is expected to be

1111%

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

1515

years to accumulate the required amount?

a.The endowment will be

$nothing.

(Round to the nearest cent.)

Explanation / Answer

How large must the endowment be

=7000/11%

=63636.36

b.

deposit at the end

=63636.36/(((1+11%)^15-1)/11%)

=1849.61

the above are the answer

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