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Finance Question

  • 12-05-2011 07:34PM
    #1
    heffo500
    Registered Users, Registered Users 2 Posts: 985 ✭✭✭


    We were asked the following question perpetuities in finance.

    A wealthy entrepreneur decides to award an annual scholarship of €5000, Assume the discount rate is 7% per year. How much money should the wealthy entrepreneur set aside today to be able to provide the such a scholarship?

    I think the answer is 71429 but my friend's opinions differ
    Tagged:


Comments

  • #2
    SBWife
    Registered Users, Registered Users 2 Posts: 1,287 ✭✭✭SBWife


    heffo500 wrote: »
    We were asked the following question perpetuities in finance.

    A wealthy entrepreneur decides to award an annual scholarship of €5000, Assume the discount rate is 7% per year. How much money should the wealthy entrepreneur set aside today to be able to provide the such a scholarship?

    I think the answer is 71429 but my friend's opinions differ

    You are correct - the value of a perpetuity is the amount divided by the discount rate. In this case 5000/.07=71,429


  • #3
    freeze4real
    Registered Users, Registered Users 2 Posts: 2,540 ✭✭✭freeze4real


    heffo500 wrote: »
    We were asked the following question perpetuities in finance.

    A wealthy entrepreneur decides to award an annual scholarship of €5000, Assume the discount rate is 7% per year. How much money should the wealthy entrepreneur set aside today to be able to provide the such a scholarship?

    I think the answer is 71429 but my friend's opinions differ

    haha you go to NUIM as well.

    BTW good luck.

    it should be easy enough.


  • #4
    heffo500
    Registered Users, Registered Users 2 Posts: 985 ✭✭✭heffo500


    freeze4real wrote: »
    haha you go to NUIM as well.

    BTW good luck.

    it should be easy enough.

    Should be not looking forward to EC110 though.


  • #5
    freeze4real
    Registered Users, Registered Users 2 Posts: 2,540 ✭✭✭freeze4real


    No I'm not looking forward to it.


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