Clare Jackson is donating $416,290 today to a charity that will establish an ann
ID: 2816754 • Letter: C
Question
Clare Jackson is donating $416,290 today to a charity that will establish an annual prize in her name of $38,000 with the first prize being awarded today. The charity can invest funds at 4.15% per annum.
financial calculator method pls
(a) How many years can the charity operate at this rate? Answer to two decimal places for part years. Note this point is likely occur part-way through a year, and after then the charity may pay one final prize of a lesser amount. Also be careful we want the length of time from today (the first prize which is awarded today is in recognition of achievements in the past year).
(b) What amount of money could the Jackson prize pay on its final occasion assuming it is saved up from its partial year and paid at the next whole number of years from today?
Explanation / Answer
(a)
PV = 416290-38000 = 378290 (todays payment reduced)
Payment per year, PMT = 38000
discount rate , rate 1/Y = 4.15%
FV = 0
PV = -378290
no of years = N
Calculate N
N = 13.107 years
(b)
PV of Final ocassion amount
N= 13 ; PMT= 38000 ; FV=0 ; 1/Y=4.15%
compute PV
PV =375947.10
PV of final prize = 378290 - 375947.1 = 2342.9
Final prize = Value after 14 years = 2342.9 * (1.041514)
= 4139.84