2. [15] Emma has finished paying her parents and decides that she will divert most of those payments towards her daughter's RESP and her own RRSP. She will divert $600 monthly to her RRSP. Her daughter has just turned 4 yeals old and will enter university when she is 18 years old. Emma expects her daughter to contribute to her own education but plans to have $42,000 available when her daughter starts university. (RESPS have government grants; RRSP have tax deferrals and refunds and both have withdrawal rules. These will be ignored here. Only the tax-free growth will be assumed.) Emma has assembled a portfolio for her RRSP that will return 5.2% compounded monthly. The education portfolio will return 3.8% compounded monthly. a. [3] How much must Emma deposit monthly to fund her daughter's education as planned?

2. [15] Emma has finished paying her parents and decides that she will divert most of those payments towards her daughter's RESP and her own RRSP. She will divert $600 monthly to her RRSP. Her daughter has just turned 4 yeals old and will enter university when she is 18 years old. Emma expects her daughter to contribute to her own education but plans to have $42,000 available when her daughter starts university. (RESPS have government grants; RRSP have tax deferrals and refunds and both have withdrawal rules. These will be ignored here. Only the tax-free growth will be assumed.) Emma has assembled a portfolio for her RRSP that will return 5.2% compounded monthly. The education portfolio will return 3.8% compounded monthly. a. [3] How much must Emma deposit monthly to fund her daughter's education as planned?

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

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Gabe and Sarah would like to begin saving for their children's college education. They would like to know the amount of college funds that would be necessary on day one of college to pay for all tuition costs for each child. The current tuition at the university is $25,000. The couple is comfortable assuming an annual rate of return of 6% on their college investment savings program. They anticipate that each child will begin college at age 18 and attend for four years. The Consumer Price Index (CPI) is expected to be 3% and the expected college inflation rate is 5% per year.
6) Susan is looking to purchase her first home five years from today. The house costs $1,550,000. She will have to make a down payment of 10% of this amount and plans to take a loan from the bank for the difference. Bank charges are approximately 15% of the loan amount. She plans to start saving from today to cover both the down payment and the bank charges. a. How much will she need to save to cover both the down payment and bank charges? b. If she currently has $195,000 in her account and will make no further deposits over the next five years, what rate of interest must she earn on this account in order to achieve the savings target calculated in part (a) above?
A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $21,413.00 per year (all expenses included). Tuition will increase by 4.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 8.00% 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) 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.
Jan wants to plan for her daughter's education. Her daughter, Rachel was born today and will go to college at age 18 for five years. Tuition is currently $15,000 per year, in today's dollars. Jan anticipates tuition inflation of 6% and believes she can earn an 11% return on her investment. How much must Jan save at the end of each year, if she wants to make her last payment at the beginning of her daughter's first year of college? $4,680.37 $7,334.72 $3,882.03 $2,547.54
Lily signed a personal loan for $7,500 with Joanne, her aunt, to pay her MBA tuition fees during the first year of her study. In the agreement, Lily promised to pay Joanne the principal plus 3.8% interest on this loan to compensate Joanne against the expected inflation on overall groceries and other costs Joanne has to cover per year based on the average rate of inflation observed in Canada since 1960 to 2021. Lily will start to make the first payment upon her graduation. a) Calculate the amount of annual interest for this loan. b) Calculate the amount of interest Lily saves if she pays back the loan six months upon graduating her MBA.
A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $20,246.00 per year (all expenses included). Tuition will increase by 4.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 8.00% 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) 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 deposit in the account when Sam, the OLDEST daughter,…
Parents wanted to save enough money to send their daughter to college. The parents were unable to save money right at birth but rather started saving money when she was 5 years old and will save until she is 18 years old. The parents would like to save up $75,000 to cover tuition and other expenses. How much would the parents need to save each month in order to meet this requirement Assume the parents save the money into an account that generated an interest of 2% per year O a $360 O b. 3370 Oc$400 Od $490
Alex wants to provide funding in the event of his death for his daughter Ellie, age 8, to attend four years of college, starting at age 18. The current annual cost of tuition is $20,000. Assume inflation of 6.5% and after-tax earnings of 7%. If Alex wants to have enough life insurance to assure adequate funds for Ellie when she begins college (should he die today), approximately how much insurance should he have for this need alone? (Round your answer to the nearest dollar.) A)$113,764 B)$75,806 C)$75,451 D)$79,441
Your grandmother loves you and wants you to get a graduate degree. She promises to pay you $1,225 right away and an equal amount every 6 months for the a total of 5 years to encourage you to continue your graduate education and get a Master of Business Administration (MBA) degree at Cal State LA. She really does love you. If you don’t spend any of the money amounts that she gives you, how much will you have accumulated at graduation if you could invest the funds at 5% compounded semiannually?
Ted and Alice Hansel have a son who will begin college 10 years from today. School expenses of $48,000 will need to be paid at the beginning of each of the four years that their son plans to attend college. What is the duration of this liability to the couple if they can borrow and lend at the market interest rate of 10.8 percent? (Do not round intermediate calculations and round your answer to 5 decimal places, e.g., 32.16161.) Answer is complete but not entirely correct. 10.09238 Duration
John and Jane have been saving to pay for their daughter Macy's college education. Macy just turned 9 at (t-0), md she will be entering college 9 years from now (at t-9). College tuition and expenses are currently $20,000 a year, but they are expected to increase at a rate of 6% a year. Tuition and other costs will be due at the end of years 9, 10, 11 and 12. To fund the tuition, John and Jane plan to save $15,000 in their college savings account today (att0). Additionally. they plan to save $5,000 in cach of the next 3 years (at t-1, 2, and 3). Then they plan to make S equal annnal contributions in each of the following years, t How large must the annual payments att-4, 5, 6, 7 and 8 be to cover Macy's anticipated college conts? 4, 5, 6, 7 and 8. They expeet their investment account to cam 10%. $10,817.03 $14,993.59 $12,127.51 $9,422.02 $13,323.61
Amanda Weet who is six years old has been gifted $100,000 (after-tax) towards a college fund. Her parents do not have the ability to add any other amounts to the fund and a good four-year college education will cost about $71,000 per-year in ten years from now. What rate of return should she earn to be able to withdraw $71,000 at the end of 10th, 11th, 12th, and 13th year respectively. (Hint: IRR problem, draw a time line)

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