Answer:
Endowment Must be $3,000,000 Large
Explanation:
The endowment can be calculated using the following formula:
Value=[tex]\frac{Cash\ Flow}{Rate\ of\ Interest}[/tex]
In our case:
Given data:
Cash Flow =$150,000 per year
Rate if interest= 5%=0.05
Required:
How large must the endowment be?
Solution:
Endowment=[tex]\frac{Cash\ Flow}{Rate\ of\ Interest}[/tex]
[tex]Endowment=\frac{150,000}{0.05}\\ Endowment=\$3,000,000[/tex]
Endowment Must be $3,000,000 Large
