You are setting up an education fund foryour new baby. You want your child to beable to withdraw the equivalent of$15,000 in today's dollars per year foreach of the 5 years they will spend atUniversity. You assume that they willbegin at University on their 18th birthday,and you want to make the first yearlydeposit on their first birthday and the laston their 18th birthday. If inflation isexpected to be 7% and interest earned onyour investments is expected to be 12%,what is the amount of the equal, annualdeposits required?

in this problem you have to first calculate the present value of education and that will be future…

w baby. You want your child to E withdraw the equivalent of O in today's dollars per year for the 5 years they will spend at ity. You assume that they will t University on their 18th birthdar i want to make the first yearly on their first birthday and the la 18th birthday. If inflation is ed to be 7% and interest earned

w baby. You want your child to E withdraw the equivalent of O in today's dollars per year for the 5 years they will spend at ity. You assume that they will t University on their 18th birthdar i want to make the first yearly on their first birthday and the la 18th birthday. If inflation is ed to be 7% and interest earned

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

See similar textbooks

Similar questions

How much should Charles save to put in an education fund for his child? Assume Charles needs $24,000 for their child’s education. Future value for 10.00 years untill starting college at an expected annual inflation of 4.00% percent.
You plan to send your first born child for a 4-year degree with 4 annual payments. Your first payment will start in 20 years in the amount of $65,000 and grow by 9% per year. Assuming a discount rate of 7%, how much do you need to set aside today to fund your child's education? Use the $ symbol and round to the nearest thousand dollars.
The parents of a newborn baby would like to put money away today to cover 100% of the child's expected total 4 - years of college tuition. The first tuition payment is due exactly 18 years from today, and the next three payments are due at the end of years 19, 20 and 21. Suppose that the parents estimate that the cost of tuition will be $86,000 per year for the first three years, but that the fourth year's tuition will be $96,000. Which comes closest to the amount of money that needs to be set aside today if the interest rate is 6% ? A. $ 104, 719 B. $ 136, 639 C. $ 16,857 D. $ 113, 608 E. $ 198, 781
A couple wants to save for their daughter's college expense. The daughter will enter college eight years from now, and she will need $50,000, $51,000, $52,000, and $53,000 in ac111al dollars over four school years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 7% per year, and the annual inflation-free interest rate is 6%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college?(a) $21,838(b) $21,945(c) $22,323(d) $22,538
A couple wants to set up a college fund for their child. The fund will give the child $1,000 per month for 48 months. The first withdrawal will occur when the child turns 18 years old. Assume that the college fund will earn j12=6%. a) How much money will need to be in the account on the child's 18th birthday in order to sustain the withdrawals? b) How much money should be set aside to establish the fund on the child's first birthday?
After the birth of your first child, you decide to buy a life insurance policy for yourself but can't decide how much to buy. In the event of your untimely death, you estimate that the life insurance money can be invested in an account earning 8% interest compounded monthly. You would like your child to get a monthly payment of $1,500.00 for 18 years.How much should your life insurance policy be worth in order to achieve your goal? I should get a life insurance policy that is worth $_______
Raymond wants to save the college tuition fees his child will need in ten years by starting with a deposit of $7,500 today and depositing another $200 at the beginning of each month. How much will Raymond have in ten years if he gets a rate of return of 4% per annum? a. $37,201 b. $39,057 c. $40,537 d. $40,441
You plan to send your first born child to College for a 4-year degree with 4 annual payments. Your first payment will start in 18 years in the amount of $50,000 and grow by 15% per year. Assuming a discount rate of 6%, how much do you need to set aside today to fund your child's education? Use the $ symbol and round to the nearest thousand dollars. A correct answer would look like $34,000.
Your grandparents are asking you for advice on when they should start collecting social security payments. If they wait until age 66, they will collect $2000 per month; but if they start collecting at age 62, they will collect $1500 per month. Assume they live to be 85, and simplify by assuming annual payments. (a) When do the higher payments catch up in total dollars received with the lower payment that starts earlier? (b) If their interest rate is 6%, which plan has a higher PW?
Suppose you have a 1-year old daughter and you want to provide R81 000 in 19 years towards hercollege education. You currently have R2 000 to invest. What interest rate must you earn to havethe R81 000 when you need it?
Suppose you wish to invest in an annuity so that you will have $120,000 at some future date for your child’s education. You call several institutions and find that the best interest rate is 5.85% compounded monthly. In addition, you wish to make $350 monthly installments, with payments made at the end of each period. If you expect to attain this goal and give your child the $120,000 by his/her 18th birthday, about how long after he/she is born do you need to start investing in the annuity? Type an explanation and/or the calculations used to arrive at your answer. Construct the payment schedule for the first 6 payments by filling in the table below: period interest cum. int. principal balance 0 1 2 3 4 5 6
Your daughter wants to the University of Cincinnati. She is already planning to start in 10 years (which is when her first tuition payment is due). Her tuition will be $19,886 per year for four years. The relevant discount rate is 8.01 percent per year. You plan to save for her education by setting aside the same amount of money per year for 9 years. What is the amount you need to save per year if you start saving at the end of this year? O $32,914.10 O $5,271.07 $3,657.12 $30,473.20 O $7,316.70

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS