You are planning a gift to the University of Mississippi. The gift will provide the salary for an endowed finance professor (the “[Your Name Here] Professor of Finance”). The first salary payment should be the equivalent of $180,000 today, and will be made one year after you make the donation. You want to be able to continue to pay the same salary indefinitely. Assume that inflation is 2%, that you will donate the gift 50 years from today, and that you can earn 6% annually on your investment.
A. How much will the professor be paid the first year of the endowment?
B. How much do you need to donate in order to make all the payments?
C. How much do you need to invest each year to make the required donation?