Aloma, a university graduate who started a successful business, wants to start an endowment in her name that will provide scholarships to IE students. She wants the scholarship to provide $10,000 per year and expects the first one to be awarded on the day she fulfills the endowment obligation. If Aloma plans to donate $100,000, what rate of return must the university realize in order to award the $10,000 per year scholarship forever?
What will be an ideal response?
Pi* = A
(100,000 – 10,000)i* = 10,000
i* = 11.1%
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What will be an ideal response?
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