A mother is thinking about funding her daughter’s medical education in 6 years when she is expected to enrol at UWI, St. Augustine. She opens a special savings account, where she can receive a lump sum in 6 years. If she is desirous of receiving $50,000 in 6 years when her daughter is matriculating, how much would you advise her to deposit in the savings account monthly if annual interest rate is 7%? Show all working.
A mother is thinking about funding her daughter’s medical education in 6 years when she is expected to enrol at UWI, St. Augustine. She opens a special savings account, where she can receive a lump sum in 6 years. If she is desirous of receiving $50,000 in 6 years when her daughter is matriculating, how much would you advise her to deposit in the savings account monthly if annual interest rate is 7%? Show all working.
Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN:9781305654174
Author:Gary A. Porter, Curtis L. Norton
Publisher:Gary A. Porter, Curtis L. Norton
Chapter9: Current Liabilities, Contingencies, And The Time Value Of Money
Section: Chapter Questions
Problem 9.12AMCP
Related questions
Question
- A mother is thinking about funding her daughter’s medical education in 6 years when she is expected to enrol at UWI, St. Augustine. She opens a special savings account, where she can receive a lump sum in 6 years. If she is desirous of receiving $50,000 in 6 years when her daughter is matriculating, how much would you advise her to deposit in the savings account monthly if annual interest rate is 7%? Show all working.
Expert Solution
Step 1
A concept through which it is studied that the current worth of money is higher than its future worth is term as the TVM (time value of money).
Step 2
Computation of the monthly savings amount:
It is computed in the following manner:
Step by step
Solved in 3 steps with 2 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
Financial Accounting: The Impact on Decision Make…
Accounting
ISBN:
9781305654174
Author:
Gary A. Porter, Curtis L. Norton
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Pfin (with Mindtap, 1 Term Printed Access Card) (…
Finance
ISBN:
9780357033609
Author:
Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:
Cengage Learning