a.
To Calculate: the future value of
Concept Introduction:
b.
To Calculate: The present value of lump sum.
Concept Introduction:Time value of money is the concept of finance which calculates the effect of time over the value of money. As per this concept, the present value of a future amount is lower than the future value. The present value/ future value of an amount are calculated using the interest rate as discount rate.
c.
To calculate: the future value of
Concept Introduction:Time value of money is the concept of finance which calculates the effect of time over the value of money. As per this concept, the present value of a future amount is lower than the future value. The present value/ future value of an amount are calculated using the interest rate as discount rate.
d.
To calculate: the present value of
Concept Introduction:Time value of money is the concept of finance which calculates the effect of time over the value of money. As per this concept, the present value of a future amount is lower than the future value. The present value/ future value of an amount are calculated using the interest rate as discount rate.
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EBK PERSONAL FINANCE TAX UPDATE
- Please answer the following questions recording your answer beside the letter identifying the question. Answers: A. В. C. D. Questions: Mr. and Mrs. Smith plan to have their daughter's college education fully funded at the end of 18 years from today. They plan to invest annually at the end of each year to reach the desired dollar amount. The Smith's estimate that they will earn 6% on all invested monies during the 18 years. The cost of college today is $30,000 annually and is expected to increase by 3% annually over each of the next 18 years. Part A- What is the expected cost of one year of college 18 years from today? Write this value beside letter A above. Part B - Begin by multiplying your answer in Part A by 4 to approximate the cost of four years of college. How much will the Smith's need to invest at the end of each year for the next 18 years to reach what you approximate the cost of four years of college to be? Write this value beside letter B above. Part C- The Smiths will each…arrow_forwardMegan Berry, a freshman horticulture major at the University of Minnesota, has some financial questions for the next three years of school and beyond. Round your answers for the following questions to the nearest dollar. If Megan's tuition, fees, and expenditures for books this year total $15,000, what will they be during her senior year (three years from now), assuming costs rise 5 percent annually? (Hint: Use Appendix A-1 or the Garman/Forgue companion website.) Round Future Value of a Single Amount in intermediate calculations to four decimal places. $ Megan is applying for a scholarship currently valued at $7,000 at the end of first year. If she is awarded it at the end of next year, how much is the scholarship worth in today's dollars, assuming inflation of 2 percent? (Hint: Use Appendix A-2 or the Garman/Forgue companion website.) Round Present Value of a Single Amount in intermediate calculations to four decimal places. $ Megan is already looking ahead to graduation…arrow_forwardAs a future graduate of the University of Minnesota, someday you would like to endow a scholarship (meaning give the university money in your name) to pay for tuition expenses for future UMN students. Assume you just graduated (congratulations!). You plan to work for fifteen years after graduation before endowing this scholarship (at the end of the fifteenth year AFTER graduation). Annual tuition at UMN is $10,000 today, and is expected to grow at the long-term average rate of inflation of 3% per year forever. Savings are expected to earn a return of 7% per year forever. a) The first tuition payment is due one year after the scholarship is endowed. How much will the tuition be when your scholarship makes the first payment? b) You would like the scholarship to pay all tuition for one student per year for the twenty years following the creation of the endowment, how much money do you need to endow the scholarship? c)If you would like the scholarship to pay for tuition for one student…arrow_forward
- 1. Blake is considering whether to enroll full-time in a two-year, webpage design certificate program. Enrolling in this program requires him to leave his current job and devote all of his available time to his studies. He plans to make his decision based on standard human capital analysis, and has obtained the following data to help with his decision: Direct Costs (tuition and fees in each year): $2,000 Current annual earnings (i.e., w/o the additional education): $5,000 After completing the certificate program, Blake will work 3 years and then retire (thus, this is a 5-period model: t = 0, 1, 2, 3, 4). His estimated annual earnings, post-schooling, in each year are: $11,000 Blake's discount rate is 3% Create a table with the following information (shown in columns): time period, direct costs in each period, indirect costs in each period, expected earnings with additional schooling, and incremental (net) benefits in each period (discounted by the appropriate rate). Given the data,…arrow_forwardDirections: Answer the following questions. Provide necessary computations. 1. The Madrigal family is experiencing some financial pressures, even though the couple has a combined income of P1,236,000 per annum. Their home loan will start this year and their eldest daughter, Julieta, will start college in only three years. Alma is contemplating saving for this coming year and told her husband, Pedro, to plan for an emergency fund. Alma's monthly salary is P29,000. a) How much should be the three-month emergency funds of Alma? b) How much should be the three-month emergency funds of Pedro? c) If the couple decided to have five-month emergency funds, how much should be their combined emergency funds?arrow_forwardFlora is planning ahead for a 3-month world tour to celebrate completing graduate school. The trip’s estimated cost is $7,000. Flora would like to accumulate that sum over the next 4 years. She plans to make monthly deposits into her school’s minibank which gives 5% interest compounded monthly. How much does she has to contribute monthly?arrow_forward
- Assume the total cost of a college education will be $245,000 when your child enters college in 15 years. You presently have $108,000 to invest for this purpose. What rate of interest must you earn to cover the cost of your child's college educ?arrow_forwardRisk is planning to attend a two-year university. The list below shows the estimated costs for one year. His family devised a periodic savings plan that will have a total value of $29,000 by the time Rick will begin college. Rick also earned a scholarship that will pay for the first year. With the scholarship and his family's contribution, for how many years of college will be paid: Round to the nearest tenth. Two-Year University Estimated Costs Tuition and Fees. $5,650.00 Room and Board. $2,970.00 Books and Supplies $1,400.00 Personal Expenses. $2,100.00 a about 2.1 years b about 2.4 years c about 3.2 years d about 3.4 yearsarrow_forwardSuppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. Currently, college tuition, books, fees, and others cost $20,000 per year. On average, tuition and other costs have historically increased at a rate of 6% per year. Assume the first college payment is made at the beginning of year 19 (i.e. immediately after the child’s 18th birthday). a) Assuming that college costs continue to increase an average of 6% per year, how much will the first college payment be? b) Assuming all college savings are invested in an account paying 8% interest, then what is the amount of money they will need to have available at age 18 to pay for all four years of the child's undergraduate education? c) How much does the couple need to save every year until their child’s 18th birthday to achieve their goal, assuming they make their first savings payment on their child’s first birthday, the last one on…arrow_forward
- B) Pinky's father is planning to admit her in a reputed university 5 years from now. Pinky is currently 15 years old; she will enroll in a university 5 years later and should graduate within 4 years. They are anticipating after 5 years the annual cost (for everything tuition fee, books) will be BDT 1, 40,060 but this cost is expected to increase by 4% annually. Universities accept the total payment in advance at the beginning of the year. Pinky currently has a saving account with BDT 100,000 in it which pays 9% interest annually. Her father is planning to make five equal annual deposit to her account; The first deposit will be made today. How large each of the annual deposit should be?arrow_forwardA professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $21,208.00 per year (all expenses included). Tuition will increase by 3.00% per year going forward. #11 O unanswered The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 not_submitted years. The professor is saving for their college by putting money in a mutual fund that pays about 9.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years) Attempts Remaining: Infinity The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college. (ASSUME that the money stays invested during college and the professor will make his last…arrow_forwardA client's child will be attending college in 5 years. Assume current tuition and fees are $46, 142, and inflation for college costs averages 6.7 percent, and Anna can earn 3.4 percent on the money she invests for this purpose. The client wants to know how much she will need to set aside today to pay four years of tuition and fees.arrow_forward