Question

Consider that it's preferable to invest $25,000 to provide for a scholarship at the end of each year in perpetuity. The first scholarship will be awarded one year from now. Find the size of the annual scholarship, if the interest rate is 5% compounded annually.

Analyzing functions
ANSWERED
asked 2021-02-11
Consider that it's preferable to invest $25,000 to provide for a scholarship at the end of each year in perpetuity. The first scholarship will be awarded one year from now. Find the size of the annual scholarship, if the interest rate is 5% compounded annually.

Answers (1)

2021-02-12
Assuming the rate is a constant 5%, use the formula:
\(\displaystyle{V}=\le^{{{k}{t}}}\)
Where l=innitial, k=rate in decimal, t= time in years.
\(\displaystyle{V}=\${25},{000}{e}^{{{0.05}{t}}}\)
Considering it's asked to calculate for one year.
\(\displaystyle{V}=\${25},{000}^{{{0.05}}}\)
=$26281.78
Rounded to cents.
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