entersWill and Jane Sparks are establishing a college fund for their 1-year-old daughter, Jennifer. They want to save enough now to pay college tuition at the time shecollege (17 years from now). If her tuition is projected to be $40,000 for a two-year degree, what annual sinking fund payment should they establish if the annual interestis 8%?Click the icon to view the table.The annual sinking fund payment is S. (Round to the nearest cent as needed.) $1.00 Sinking Fund PaymentsPeriods14%6%8%2%1%21.0000000 1.0000000 1.0000000 1.0000000 1.0000000 1.00000000.4975124 0.4950495 0.4926108 0.4901961 0.4854369 0.48076923 0.3300221 0.3267547 0.3235304 0.3203485 0.3141098 0.30803350.2462811 0.2426238 0.2390270 0.2354900 0.2285915 0.22192080.1960398 0.1921584 0.1883546 0.1846271 0.1773964 0.17045650.1625484 0.1585258 0.1545975 0.1507619 0.1433626 0.13631540.1386283 0.1345120 0.1305064 0.1266096 0.1191350 0.11207240.1206903 0.1165098 0.1124564 0.1085278 0.1010359 0.09401480.1067404 0.1025154 0.0984339 0.0944930 0.0870222 0.08007970.0955821 0.0913265 0.0872305 0.0832909 0.0758680 0.06902950.0864541 0.0821779 0.0780774 0.0741490 0.0667929 0.060076345678Rate per period3%910114

As per the given information: Amount = $40,000Annualized rate of return (r) = 8%No. of years (n) =…

Answered: Will and Jane Sparks are establishing a…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 33P

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Comprehensive The following are three independent situations: 1. K. Herrmann has decided to set up a scholarship fund for students. She is willing to deposit 5,000 in a trust fund at the end of each year for 10 years. She wants the trust fund to then pay annual scholarships at the end of each year for 30 years. 2. Charles Jordy is planning to save for his retirement. He has decided that he can save 3,000 at the end of each year for the next 10 years, 5,000 at the end of each year for Years 11 through 20, and 10,000 at the end of each year for Years 21 through 30. 3. Patricia Karpas has 200,000 in savings on the day she retires. She intends to spend 2,000 per month traveling around the world for the next 2 years, during which time her savings will earn 18%, compounded monthly. For the next 5 years, she intends to spend 6,000 every 6 months, during which time her savings will earn 12%, compounded semiannually. For the rest of her life expectancy of 15 years, she wants an annuity to cover her living costs. During this period, her savings will earn 10% compounded annually. Assume that all payments occur at the end of each period. Required: 1. In Situation 1, how much will the annual scholarships be if the fund can earn 6%? How much at 10%? 2. In Situation 2, (a) How much will Charles have at the end of 30 years if his savings can earn 10%? How much at 6%? (b) If Charles expects to live for 20 years in retirement, how much can he withdraw from his savings at the end of each year if his savings earn 10%? How much at 6%? (c) How much would Charles need to invest today to have the same amount available at the time he retires as calculated in Situation 2(a) at 10%? How much at 6%? 3. In Situation 3, how much will Patricias annuity be?
Your friend has a trust fund that will pay her the following amounts at the given interest rate for the given number of years. Calculate the current (present) value of your friends trust fund payments. For further instructions on present value in Excel, see Appendix C.
Michiko and Saul are planning to attend the same university next year. The university estimates tuition, books, fees, and living costs to be 12,000 per year. Michikos father has agreed to give her the 12,000 she needs to attend the university. Saul has obtained a job at the university that will pay him 14,000 per year. After discussing their respective arrangements, Michiko figures that Saul will be better off than she will. What, if anything, is wrong with Michikos thinking?

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