Question

Mr. Smart wants to set up an annual scholarship by donating $50,000 to the scholarship fund of his university. If the first payment is to be made in 5 years and interest is 4% compounded annually, what is the amount of the annual scholarship?

Answer 1

$60,832.65

Explanation:

The formula for calculating the amount is expressed as;

A = P(1+r)^t

P is the principal = $50,000

r is the rate = 4% = 0.04

Time = 5 years

substitute;

A = 50000(1+0.04)^5

A = 50000(1.04)^5

A = 50,000(1.2167)

A = 60,832.65

Hence the amount of the annual scholarship is $60,832.65