What is the cost of endowing the scholarship today

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Reference no: EM132025631

You want to create a scholarship that will pay $15,000 in real dollars per year forever. The first payment for the scholarship is a year from now. You can earn an interest rate of 12% APR, compounded monthly, on your investments and inflation is 2% APR, compounded annually.

(a) What is the nominal effective annual rate (EAR) at which you can invest?

(b) What is the real annual rate at which you can invest?

(d) What is the amount you have to set aside today if you’d like the scholarship to begin making payments 21 years from now?

Reference no: EM132025631

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