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Cheyenne wishes to endow a professorship at her alma mater. She learns that to do so, she must contribute $1,000,000. What annual salary would a $1,000,000 gift support forever if salary payments are made monthly, starting one month after the gift, and the money's growth is governed by an annual effective discount rate of 6%?

Respuesta :

Answer:

$62,035

Explanation:

EAR = [(1 + 0.06 / 12)^12. - 1] = [(1 + 0.005)^12 - 1] = 1.062 -1 = 0.062

Perpetuity = salary × 1/rate

1,000,000 = salary × 1/0.062

1,000,000 = salary × 16.13

Salary = 1,000,000/ 16.12 = $62,035