Question

You would like to establish a fund that will be used to offer a scholarship each year to a worthy student at your alma mater. You would like the total annual award to be $5,000, with the first award to be presented next year. Your alma mater is able to invest the funds at a constant, annual, tax-free rate of 8%. How much must you donate today to fund this award? Round your answer to the nearest dollar.

Answer 1

Present Value= $4,716.98

Step-by-step explanation:

Giving the following information:

You would like the total annual award to be $5,000, with the first award to be presented next year. Your alma mater can invest the funds at a constant, annual, tax-free rate of 8%

We need to use the following formula:

PV= FV/(1+i)^n

PV= 5,000/1.06= $4,716.98