(1) (ii) GCB Bank wishes to make some donations to academic institutions. One of the Directors...

 

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(1) (ii) GCB Bank wishes to make some donations to academic institutions. One of the Directors of the Directors of GCB Bank is an ex-student of GIMPA. After consultation, it is decided that GCB Bank will endow a position of Professor. Of Financial Economics at the GIMPA. Initially, it is agreed between GCB Bank and the GIMPA that the Professor will be remunerated at $55,000 a year. In perpetuity. However, it is quickly. Realized that allowance must be made for possible growth in salaries. According to past trends, it is anticipated that the growth in. professorial salaries will probably average about 3.5 percent a year. The rate of interest is 7 percent. Calculate the amount that must be set aside if the growth in salary is not allowed for. Calculate the amount that must be set aside allowing for the growth in the salary. (1) (ii) GCB Bank wishes to make some donations to academic institutions. One of the Directors of the Directors of GCB Bank is an ex-student of GIMPA. After consultation, it is decided that GCB Bank will endow a position of Professor. Of Financial Economics at the GIMPA. Initially, it is agreed between GCB Bank and the GIMPA that the Professor will be remunerated at $55,000 a year. In perpetuity. However, it is quickly. Realized that allowance must be made for possible growth in salaries. According to past trends, it is anticipated that the growth in. professorial salaries will probably average about 3.5 percent a year. The rate of interest is 7 percent. Calculate the amount that must be set aside if the growth in salary is not allowed for. Calculate the amount that must be set aside allowing for the growth in the salary.