Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

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)

Step by Step Solution

There are 3 Steps involved in it

Step: 1

Lets break down the problem step by step a Determine the amount that was donated The perpetuity pays ... blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Personal Finance Turning Money into Wealth

Authors: Arthur J. Keown

8th edition

134730364, 978-0134730363

More Books

Students also viewed these Accounting questions

Question

20. In what ways are hurt feelings similar to physical pain?

Answered: 1 week ago