A small community college is hoping to raise enough funds to put together an endowment in which the scholarships will be paid for by only the interest earned from the endowment. Assuming they can earn an average of 7.50% for the APR and that only the interest would be spent each year, how much money would need to be invested initially in the endowment account as a lump sum in order pay for $80,000 in scholarships?

Answer 1

I = PRT

80,000 = P * 0.075 * 1

80,000 / 0.075 = P

1,066,666.67 = P