3. Your client has a 2-year old child whose college education they plan to fund when the child turns 18 in EXACTLY 16 years They plan to accumulate a lump sum by the first day of school to pay their child $2,000 a month BEGINNING the first day of school for the next 4 years (48 monthly payments). How much must your client invest EACH MONTH starting TODAY at the BEGINNING of each month in the mutual fund portfolio you recommend with a 7% expected return? STEP 1: Calculate the lump sum your child will need at the start of the their FIRST semester that will provide them with a $25,000 payment at the beginning of each semester. PV I/Y PMT FV STEP 2: Use the lump sum from STEP 1 to calculate the monthly payments they must make starting today at the beginning ofeach month as the child ages from 2 years old to 18 years old PV N I/Y PMT FV
3. Your client has a 2-year old child whose college education they plan to fund when the child turns 18 in EXACTLY 16 years They plan to accumulate a lump sum by the first day of school to pay their child $2,000 a month BEGINNING the first day of school for the next 4 years (48 monthly payments). How much must your client invest EACH MONTH starting TODAY at the BEGINNING of each month in the mutual fund portfolio you recommend with a 7% expected return? STEP 1: Calculate the lump sum your child will need at the start of the their FIRST semester that will provide them with a $25,000 payment at the beginning of each semester. PV I/Y PMT FV STEP 2: Use the lump sum from STEP 1 to calculate the monthly payments they must make starting today at the beginning ofeach month as the child ages from 2 years old to 18 years old PV N I/Y PMT FV
Chapter15: Mutual And Exchange Traded Funds
Section: Chapter Questions
Problem 3LTAI
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