Your son Bob is 14 years old today. You are planning for his college education. Bob will start schoolon his 19th birthday. You wish to set aside some money early to send Bob to four years of school.You have decided that you will give Bob $15,000 per year for each of his first two years of college, and$20,000 per year for each of his last two years of college. You will give these amounts to Bob at thebeginning of each school year. You will make 5 equal annual deposits to fund the account. The firstpayment will be made one year from today and the last payment will be made the day Bob leaves forcollege. You wish to have just enough money in the bank to fund Bob's entire education on the daythat he leaves for school. Any money that is in the aCcount will continue to earn interest while Bob isin school. Because of a new program, the bank has agreed to give you a 10 percent, nominalcompounded annually, return on your investments throughout the entire time period. How much doyou need to deposit into the account in each of the 5 years in order to fund Bob's education? Showyour work to earn partial credit.

First, We need to compute the total amount required when BOB leaves for school. This can be computed…

one ecided that you will give Bob $15,000 per yE year for each of his last two years of colleE f each school year. You will make 5 equal a Il be made one year from today and the las wish to have just enough money in the bar

one ecided that you will give Bob $15,000 per yE year for each of his last two years of colleE f each school year. You will make 5 equal a Il be made one year from today and the las wish to have just enough money in the bar

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 37P

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Question

Your son Bob is 14 years old today. You are planning for his college education. Bob will start school
on his 19th birthday. You wish to set aside some money early to send Bob to four years of school.
You have decided that you will give Bob $15,000 per year for each of his first two years of college, and
$20,000 per year for each of his last two years of college. You will give these amounts to Bob at the
beginning of each school year. You will make 5 equal annual deposits to fund the account. The first
payment will be made one year from today and the last payment will be made the day Bob leaves for
college. You wish to have just enough money in the bank to fund Bob's entire education on the day
that he leaves for school. Any money that is in the aCcount will continue to earn interest while Bob is
in school. Because of a new program, the bank has agreed to give you a 10 percent, nominal
compounded annually, return on your investments throughout the entire time period. How much do
you need to deposit into the account in each of the 5 years in order to fund Bob's education? Show
your work to earn partial credit.

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