a rich singer has donated $457,882 to endow a university professorial chair in bohemian studies. if the money is invested at 11.41%, how much can be withdrawn each year, ad infinitum (indefinitely), to pay the professor of b.s.?

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26-10-2022
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a rich singer has donated $457,882 to endow a university professorial chair in bohemian studies. if the money is invested at 11.41%, how much can be withdrawn each year, ad infinitum (indefinitely), to pay the professor of b.s.?

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qwlavender qwlavender · Answer 1 · 2022-10-30T05:37:08-04:00

If the money is invested at a interest rate of 11.41%, 33228.83 can be taken out each year to pay a B.S. professor.

A security having ongoing cash flow payments is referred to as perpetual in the financial industry. It basically functions as a perpetual annuity. The present value of a perpetuity may be calculated by simply dividing the total amount of the regular cash flows by the discount rate.

An illustration of a perpetual annuity's present value is the scenario described above.

In this instance, the annuity's present value is 318589.

The interest rate is 10.43%.

Calculating the annuity amount is necessary.

PV of perpetual annuity = Annuity ÷ Rate

318589 = Annuity ÷ 10.43%

Annuity = 318589 × 10.43%

= 33228.83

To learn more about present value

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