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A student loan scheme has just received a large donation from a donor. They have deposited the money in a perpetuity that will pay
A student loan scheme has just received a large donation from a donor. They have deposited the money in a perpetuity that will pay R10 000 000 per annum at a return of 5%. They expect to have R100 000 in expenses each year but will give out the balance as student loans to final year students. In their projections they estimate that 60% of the money lent will be repaid by the students in annual instalments over the five-year period after the student graduate. Students are charged interest at 7% per annum and all amounts received will be reinvested in student loans in the next year. a) Determine the amount that was donated. (4 Marks) b) Determine the receipts of the fund for the first four years of the scheme. You may take the first year as the year in which the first loans are made (14 Marks)
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