For Part B of this question, the answer was the endowment has a perpetual time horizon. I understand that is the general case for endowments. However, the case states that the endowment expects no future contributions. Given that the spending rate is 8%, doesn’t that mean the endowment’s days are numbered (i.e. not perpetual)?
Not if its return is enough to cover the spending plus administrative costs.
As an analogy, imagine your money is kept in bank. If the interest from that savings is utilized for your daily expenses and the principal is not touched, then you will be able to live off that money forever.
In point of fact, you won’t.
Eventually, you’ll die.
But I like the example.
Ah okay I see now, thank you guys
My pleasure.