An endowment has been setup to fund ten engineering scholarships of $10,000 each every year in a state university in Tennessee starting year 11. If the endowment is expected an earn 8% rate of return, the endowment is worth $1,000,000.

Question

Quizplus · Accepted Answer

The endowment needs to be calculated based on the present value of an annuity formula, considering the 8% rate of return and the $100,000 annual payout starting in year 11. The present value of these future payouts would be less than $1,000,000.

An Endowment Has Been Setup to Fund Ten Engineering Scholarships