When Nancy died, she left $20 000 for her 13 year old grandson, Max, to be paid to him as an annual scholarship of $8000 at the beginning of each year, if he ends up in the university. The inheritance was invested in a scholarship fund for 5 years at 9% compounded annually. How long will the scholarship be paid, once Max enters the university?

Question

Quizplus · Accepted Answer

After 5 years of investment at 9% compounded annually, the initial amount of $20 000 would have grown to $30 569.56. 
Since Max will receive $8000 at the beginning of each year, he will exhaust the fund in 3 years ($8000 x 3 = $24 000). Therefore, the scholarship will only be paid for 5 years, as the remaining $6 569.56 will not be enough to fund another year.

When Nancy Died, She Left $20 000 for Her 13