A hospital received a contribution to its endowment fund of $2 million. The hospital can never touch the principal, but it can use the earnings. At an assumed interest rate of 9.5 percent, how much can the hospital earn to help its operations each year?
A) $95,000
B) $19,000
C) $190,000
D) $18,000

Question

Quizplus · Accepted Answer

To calculate the annual earnings, we simply multiply the principal ($2 million) by the interest rate (9.5% or 0.095):

$2,000,000 x 0.095 = $190,000

Therefore, the hospital can earn $190,000 each year to help its operations.

A Hospital Received a Contribution to Its Endowment Fund of $2