The alumni association of Seneca College is initiating a one-year drive to raise money for a perpetual scholarship endowment fund. The goal is to offer ten scholarships per year, each worth 5000.
(a). How large a fund is required to begin awarding the scholarships one year after the funds are in place if the funds can be invested to earn 5% compounded annually in perpetuity?
(b). Suppose that, during its fundraising year, the alumni association finds an insurance company that will pay 5.5% compounded annually in perpetuity. How much less money does the association need to raise?
(c). What dollar amount in scholarships can be awarded annually if the alumni association raises only 750,000? Use the interest rate from part (b).
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