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anonymous
 5 years ago
A perpetuity is similar to a decreasing annuity, except that the payments continue forever. A grateful alumnus decides to donate a permanent scholarship of $1440 per year. How much money should be deposited in the bank at 8% interest compounded annually in order to be able to supply the money for the scholarship at the end of each year?
anonymous
 5 years ago
A perpetuity is similar to a decreasing annuity, except that the payments continue forever. A grateful alumnus decides to donate a permanent scholarship of $1440 per year. How much money should be deposited in the bank at 8% interest compounded annually in order to be able to supply the money for the scholarship at the end of each year?

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anonymous
 5 years ago
Best ResponseYou've already chosen the best response.0Since it is compounded each year, and 1440 is then taken out, only 1440 needs to be the interest. We are assuming the minumum, so $1440 tops. This means that the relationship is: \[8/100 = 1440/x\] so \[x=1440/(8/100) = 1440(100)/8 = 144000/8 = 18000\] thus he needs to deposit 18000.
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