This preview shows page 1. Sign up to view the full content.
Unformatted text preview: she was attending, to create an endowment. The endowment is to allow three needy students to take the introductory finance course
each year in perpetuity. The guaranteed annual cost of tuition and books for the
course is $600 per student. The endowment will be created by making a single
payment to the university. The university expects to earn exactly 6% per year
on these funds.
a. How large an initial single payment must Marla’s parents make to the university to fund the endowment?
b. What amount would be needed to fund the endowment if the university
could earn 9% rather than 6% per year on the funds? 178 PART 2 Important Financial Concepts LG4 4–25 Future value of a mixed stream For each of the mixed streams of cash flows
shown in the following table, determine the future value at the end of the final
year if deposits are made at the beginning of each year into an account paying
annual interest of 12%, assuming that no withdrawals are made during the
Cash flow stream
Year C $ 900 $30,...
View Full Document