Question

If the university's school of engineering can earn 4% on it's investments, how much should be in it's savings account to fund one $5000 scholarship each year for 10 years?

Answer 1

Answer:

$40,554.50

Explanation:

we can use the present value of an annuity formula to solve this:

present value = annual payment x annuity factor

• annual payment = $5,000
• annuity factor (PV, 4%, 10 periods) = 8.1109

present value = $5,000 x 8.1109 = $40,554.50

The School of Engineering needs to have $40,554.50 to fund one scholarship worth $5,000 for ten years.