Calculation of Effective Interest Rate Over a Scholarship-Multiple Choice Question

Question

After many years teaching finance at Georgetown University, Johnathan wants to establish a scholarship to offer 4 $1,000 awards each year to students whose performance is excellent in finance courses. If the university can negotiate a 12.75% effective interest rate, at least how much does Johnathan need to endorse over to the scholarship (closest estimate)?

A) $32,000

B) $31,000

C) $31,500

D) $32,500