You Have Decided to Endow a Chair in Finance at Whatsamatta

Multiple Choice

You have decided to endow a Chair in Finance at Whatsamatta University.How much money must you deposit into the endowment account today if the Chair pays $125,000 per year (first payment one year from today) ,increases at a rate of 2% per year forever,and is invested at a rate that pays out 4.50% per year?

A) $2,777,777.78
B) $2,902,777.78
C) $5,000,000.00
D) There is not enough information to answer this question.