Answered: The Hernandez family is experiencing…

Economics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506725

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter27: Investment, The Capital Market, And The Wealth Of Nations

Section: Chapter Questions

Problem 13CQ

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The Hernandez family is experiencing some financial pressures, even though the couple has a combined income of $82,000. Also, their eldest son, Joseph, will start college in only three years. Maria is contemplating going to work full time to add about $33,000 to the family's annual income.

How will this change in income affect the family's emergency fund needs?

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How much should they save annually for the next three years if they want to build up Joseph's college fund to $31,000, assuming a 5 percent rate of return and ignoring taxes on the interest?

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