HARD CHALLENGING FINANCE QUESTION!!!?

Posted on 2014-04-21 12:55:00 in Finance by SASCER

On January 1, 2009, you created a $5,000,000 foundation with the University of Waterloo as its sole beneficiary. The foundation will make regular monthly payments to the school at the beginning of each month with the payments expected to continue forever. To protect the value of the payments from inflation, you want the payments to increase by 2% per year (so if the school receives $X every month in year 2009, then it will receive $X × 1.02 each month in 2010, $X × 1.022 in 2011, etc.). The first payment was deposited in the school’s checking account on January 1, 2009. How big was this first payment (in other words, what is X)? Assume an EAR of 6.1677%.



I'm so lost with this question. It's insane. Can anyone help me?

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