This Question: 20 pts 2 of5 (0 This Quiz: 100 pts Many awn for expenses without

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This Question: 20 pts 2 of5 (0 This Quiz: 100 pts Many awn for expenses without depleting the principal Suppose a scholarship endowment is established with a generous gift of $70.000. Complete parts (a)-(c) below cortect choice below and fll in the answer box to complete your choice Do not round until the final answer. Then round to the nearest cent as needed) O A. The endowment will generate the scholarship O B. The endowment will not generate enough for the scholarship because the interest b, Ifthe annual interest rate erops to 6 9%, does account fil in the answer box to complete your choice (Do not round unti the final answor Then round to the nearest cent as needed ) O A. enough for the scholarship because the interest earned s1. 's more than $5000 earned Sis less than $5000 the account generate enough interest to provide a $5000 scholarship every year? Select the correct choice below and The ondowment will generate enough for the scholarship because the interest earned, Sil is more than $5000 O 8. The endowment vil not generato onough for the scholarshig because the wterestadess han $500 c Estimate (a little trial and error is needed) the minimum interest rate that will allow the fund to pa The minimum APR s the fund to payout a $5000 scholarship per year Round to one decimal place as needed) (MAT 143-01IN Summer 2018) is based on Bennett Using and

Explanation / Answer

A = P (1+i)n

P = principle = 70000

r = interest rate = 7.6%

A = amount

n = period = 1 year, but since compounding is monthly period = 12

final interest rate = i = r/n = 7.6%/12

A = 70000*(1+7.6%/12)12

A = 70000*1.0787 = 75509.3

Hence interest generated = 75509.3 - 70000 = 5509.3

this is greater than 5000 by 509.3

option A = interest earned is 509.3 greater than 5000

b) rate of interest reduced to 6.9%

New A = 70000*(1+6.9%/12)12

= 70000*1.0712245

= 74985.715

hence it will not generate enough interest to give scholarship of 5000 since it is less by 14.285 from 5000.

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