Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $16,500 a year, but they are expected to increase at a rate of 4.0% a year. Candice should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, Cameron and Diamond have accumulated $10,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $5,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Candice's anticipated college costs? O a. $10,202.60 O b. $8,079.29 O c. $7,171.90 O d. $8,806.43 O e. $9,360.18
Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $16,500 a year, but they are expected to increase at a rate of 4.0% a year. Candice should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, Cameron and Diamond have accumulated $10,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $5,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Candice's anticipated college costs? O a. $10,202.60 O b. $8,079.29 O c. $7,171.90 O d. $8,806.43 O e. $9,360.18
Excel Applications for Accounting Principles
4th Edition
ISBN:9781111581565
Author:Gaylord N. Smith
Publisher:Gaylord N. Smith
Chapter27: Time Value Of Money (compound)
Section: Chapter Questions
Problem 6E
Related questions
Question
![Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned 10 (at t = 0), and she will be entering college 8 years
from now (at t = 8). College tuition and expenses at State U. are currently $16,500 a year, but they are expected to increase at a rate of 4.0% a year. Candice
should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning
of each school year (at t = 8, 9, 10, and 11).
So far, Cameron and Diamond have accumulated $10,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional
$5,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7.
They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Candice's anticipated college costs?
O a. $10,202.60
O b. $8,079.29
O c. $7,171.90
O d. $8,806.43
O e. $9,360.18](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F28b4905d-599c-47b9-8da7-0f0b5ad7bdef%2F6307ea1e-d57d-47f7-85cd-9bb4bed5d084%2Flz6bttn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned 10 (at t = 0), and she will be entering college 8 years
from now (at t = 8). College tuition and expenses at State U. are currently $16,500 a year, but they are expected to increase at a rate of 4.0% a year. Candice
should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning
of each school year (at t = 8, 9, 10, and 11).
So far, Cameron and Diamond have accumulated $10,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional
$5,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7.
They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Candice's anticipated college costs?
O a. $10,202.60
O b. $8,079.29
O c. $7,171.90
O d. $8,806.43
O e. $9,360.18
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