223.10
10. If interest rates are 9%, compounded annually, how much would it cost today to set up a scholarship that pays $20,000 per year forever, starting immediately? (5 pts.)
The perpetuity formula would give us the value of a scholarship starting next year. This one starts immediately, so we have to add on the additional payment.
What if you wanted the amount the scholarship pays out to grow at 3% per year to keep up with inflation--then how much would it cost? (3 pts.)
