Assume you wish to establish a college scholarship of $2,000 paid at the end of each year for a deserving student at the high school you attended. You would like to make a lump-sum gift to the high school to fund the scholarship into perpetuity. The school's treasurer assures you that they will earn 7.5 percent annually forever.
a. How much must you give the high school today to fund the proposed scholarship program?
b. If you wanted to allow the amount of the scholarship to increase annually after the first award (end of year 1) by 3 percent per year, how much must you give the school today to fund the scholarship program?
c. Compare, contrast, and discuss the difference in your response to parts (a) and (b).