George Jefferson Established a Trust Fund That Provides $150,000 in Scholarships

question 83

Multiple Choice

George Jefferson established a trust fund that provides $150,000 in scholarships each year for worthy students. The trust fund earns a 4.25% rate of return. How much money did Mr. Jefferson contribute to the fund assuming that only the interest income is distributed?

• A) $3,291,613.13
• B) $3,529,411.77
• C) $3,750,000.00
• D) $4,328,970.44
• E) $6,375,000.00

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Definitions:

Oil Production

The extraction of crude oil from the earth, which is later refined and used in the production of various energy products and other materials.

Opportunity Cost

The sacrifice of potential gains that could have been obtained from unchosen options.

Cost of Capital

The required return necessary to make a capital budgeting project, such as building a new factory, worthwhile.

Beta Coefficient

Amount of systematic risk present in a particular risky asset relative to an average risky asset.