If the scholarship is invested to earn an annual real


A wealthy graduate of a local university wants to establish a scholar- ship to cover the full cost of one student each year in perpetuity at her university. To adequately prepare for the administration of the schol- arship, the university will begin awarding it starting in three years. The estimated full cost of one student this year is $45,000 and is expected to stay constant in real terms in the future. If the scholarship is invested to earn an annual real return of 5 percent, how much must the donor contribute today to fully fund the scholarship?

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Finance Basics: If the scholarship is invested to earn an annual real
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