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Today you want to endow a scholarship that will pay $ per year forever, starting years from now. if the school's endowment discount rate is %, what amount must you donate to endow the scholarship?

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You want to award a scholarship that pays $12,000 annually from one year to forever. If the school's basic deduction rate is 8%.

First, divide the future cash flow (FV) value by the present value (PV). Then multiply the amount obtained in the previous step by the reciprocal of the number of years (n). Finally, subtract 1 from the value to calculate the discount rate.

The term 'discount rate' is used when considering an amount to be received in the future and calculating its present value. The word "discount" means "to deduct a certain amount". Subtract the discount rate from the future monetary value to determine the present value.

For example, $100 invested today in a savings plan that offers 10% interest increases to $110. In other words, $110 (future value) discounted at a 10% interest rate is worth $100 (present value) today.

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