Economic Rationality Would Argue Against a University Accepting a Split-Interest

question 52

Multiple Choice

Economic rationality would argue against a university accepting a split-interest agreement in which a fixed annuity is payable to the donor if:

• A) The donor has attached conditions to the gift.
• B) The university has no immediate need for the assets.
• C) The sum of future annuity payments plus interest thereon exceeds the fair market value of the assets.
• D) The present value of the future annuity payments and other liabilities exceed the fair market value of the assets.

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Definitions:

Fixed Dividends

Regular, predetermined dividend payments made by a corporation to its preferred stockholders.

Underwriting

The process by which an individual or institution takes on financial risk for a fee, such as in the issuance of insurance policies or financial securities.

Insurance Companies

Financial institutions that provide coverage, compensating financial losses during accidents, property damage, or other liabilities.

Discount Rate

The interest rate charged by central banks on loans to commercial banks or financial institutions, influencing monetary policy and economic activity.