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Find what is the starting salary

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After a retiring from a successful business? career, you would like to make a donation to your university. This donation will go into the? school's endowment pool and the returns generated from the donation will support the salary of a new professor in the business school on a perpetual basis. The university expects to earn returns of? 5.5% on its endowment pool. You may assume that any distributions to support the salary will be made annually.

Problem 1: After further? discussions, the university determines that the employment agreement with the new professor will call for annual salary increases of? 2%. Given this new? requirement, and assuming the first salary distribution will still occur one year from? today, what is the starting salary? (at t=1) that can be supported with your? $2,000,000 donation?

A. $40,000
B. ?$112,200
C. ?$70,000
D. ?$150,000

Reference no: EM132770378

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