Asked by kiran
Susan would like to set up an endowment fund which would award a student with a scholarship of $500 at the end of each year. The scholarship will continue in perpetuity. The interest rate is 6% compounded semi-annually, and the first award is made one year from today. How much should Susan invest today?
Answers
Answered by
Steve
annual interest is
P((1+.06/2)^2-1)
so, you need
P(1.03^2-1) = 500
P = $8210.18
P((1+.06/2)^2-1)
so, you need
P(1.03^2-1) = 500
P = $8210.18
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