A University Alumni Group Wishes to Provide an Annual Scholarship

question 19

Multiple Choice

A university alumni group wishes to provide an annual scholarship in the amount of $1,100 beginning next year. If the scholarship fund will earn an interest rate of 5% / year compounded continuously, find the amount of the endowment the alumni are required to make now. ​

• A) $22,559
• B) $21,118
• C) $22,000
• D) $21,556

---

Definitions:

Market Value

The prevailing market rate at which a service or asset is available for purchase or sale.

Par Value Common Stock

The nominal or face value assigned to common stock shares in the corporate charter, which may differ significantly from the market value.

Paid-in Capital

The amount of money that a company receives from selling its shares directly to investors, not including the stock value on secondary markets.

Par Preferred Stock

A type of preferred stock with a nominal face value, which determines dividend payments and is prioritized over common stock in the event of liquidation.