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A University Has $16,000,000 Invested in Its Endowment

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Essay

A university has $16,000,000 invested in its endowment.The university wants to withdraw $800,000 from this endowment starting next year and continuing at annual intervals forever,with each subsequent payment growing at 4% per year.What rate of return does the endowment have to earn to sustain the desired withdrawals?


Definitions:

Moral Reasoning

The process through which individuals make decisions about what is right or wrong, based on ethical principles.

Cognitive Development

Development involving the ways that growth and change in intellectual capabilities influence a person’s behavior.

Young Adulthood

A stage of human development that occurs approximately from the late teens through the late twenties, highlighting significant transitions in personal, social, and professional domains.

Middle Childhood

A stage of human development that typically covers the early school years from ages 6 to 12, marked by significant growth in social, cognitive, and physical areas.

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