How much does bolzano ltd need to provide today

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Reference no: EM132518182

Point 1: Bolzano Ltd has decided to provide an annual prize in perpetuity for a local university student who demonstrates outstanding leadership. The initial prize, to be awarded in exactly one year's time, will have a value of $500. The value of the prize will be increased in line with inflation, which can be assumed to be 2.75%. The university will invest funds today to provide for this scholarship, and the return on this investment fund is 5.25%.

Point 2: To set up the fund there is an initial administration cost of $100. As well, each year there is an administration cost of 1% of the value of that year's prize. Bolzano Ltd is responsible for these costs.

Point 3: For the scholarship to go ahead, Bolzano Ltd must provide the university with all funds today.

Question 1: How much does Bolzano Ltd need to provide today to the university so that the prize can be initiated?

Reference no: EM132518182

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