In 30 Years, You Plan to Set Up a Fellowship

question 54

Multiple Choice

In 30 years, you plan to set up a fellowship fund for your university that pays out $100,000 each year in perpetuity with an annually compounded discount rate of 5%.In order to set up the fund in 30 years, how much do you need to save each year (starting at the end of this year) assuming you can get a semi-annually compounded return of 10% on your savings for the next 30 years?

• A)$66,666.67
• B)$11,595.56
• C)$21,215.49
• D)$30,744.90
• E)$30,000.00

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Definitions:

Velocity of Money

The rate at which money circulates in the economy, typically measured as the ratio of GDP to the national money supply.

United States

A country located in North America, comprising 50 states, a federal district, five major self-governing territories, and various possessions.

Mid 1950s

Refers to the period from 1954 to 1956, a time characterized by post-WWII recovery, significant cultural shifts, and the early stages of the Cold War.

Stabilization Policy

Government policies aimed at stabilizing the economy by reducing fluctuations in production, employment, and prices.