Determine the amount of money required to set up a charitable endowment that pays the amount $P$ each year indefinitely for the annual interest rate compounded continuously. $P = \$ 12,000 , r = 6 \%$
A)$210,000
B)$200,000
C)$220,000
D)$240,000
E)$230,000

Question

Quizplus · Accepted Answer

The formula for the present value of a perpetuity with continuous compounding is $ PV = \frac{P}{r} $. Here, $ P = 12,000 $ and $ r = 0.06 $. So, $ PV = \frac{12,000}{0.06} = 200,000 $.

Determine the Amount of Money Required to Set Up a Charitable