A non-profit organization has an endowment of 13000000


Question: A non-profit organization has an endowment of $13,000,000, which is invested as follows: 30% in safe money market fund yielding an annual, real rate of return of 4%; 40% in an indexed stock fund with an expected long-run, annual real rate of return averaging 12%; and 30% in an aggressive growth fund with an expected long-run, average, annual rate of return of 15%. The organizations expected annual operating budget is $1,365,000 while maintaining the principal in the endowment at $13,000,000. Suppose the organization wanted to finance an expansion of their office space. The expansion wwill incur a $1,800,000 financial cost beginning at the end of year three. What annual contribution to a "capital fund" would have to be deposited in each of the next three years to accumulate the needed amount? Assume the money will be invested in the stock fund with a 7% return.

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Finance Basics: A non-profit organization has an endowment of 13000000
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