3. Your client has a 2-year old child whose college education they plan to fund when the child turns 18in EXACTLY 16 yearsThey plan to accumulate a lump sum by the first day of school to pay their child $2,000 a monthBEGINNING the first day of school for the next 4 years (48 monthly payments).How much must your client invest EACH MONTH starting TODAY at the BEGINNING of eachmonth in the mutual fund portfolio you recommend with a 7% expected return?STEP 1: Calculate the lump sum your child will need at the start of the their FIRST semester that willprovide them with a $25,000 payment at the beginning of each semester.PVI/YPMTFV STEP 2: Use the lump sum from STEP 1 to calculate the monthly payments they must make starting todayat the beginning ofeach month as the child ages from 2 years old to 18 years oldPVNI/YPMTFV

Calculation of Lump Sum Payment and Monthly Payments:The lump sum payment is $746,005.43 and monthly…

Answered: 3. Your client has a 2-year old child…

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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Similar questions

4) Ashley deposits $500 into an investment fund each January 1 starting in 2005 and continuing to 2014 inclusive. If the fund has an average annual growth rate of ji = 10%, how much will be in her account on January 1, 2019?
You deposit the following at the end of each year into a growth mutual fund that earns 11 percent per year: How much should the fund be worth at the end of 5 years How much interest have you earned in total?
You are going to invest in a stock mutual fund with a front-end load of 6 percent and an expense ratio of 1.39 percent. You also can invest in a money market mutual fund with a return of 2.6 percent and an expense ratio of 0.10 percent. If you plan to keep your investment for 2 years, what annual return must the stock mutual fund earn to exceed an investment in the money market fund? What if your investment horizon is 9 years? Note: Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places. 2 Years 9 Years Annual Return % %
Question 1(a) Currently, Eric has $100,000 and her investment horizon is 8 years (i.e., all investments will be terminated at the end of year 8). He is considering one of the following investments products being offered by his private banker from OCBC Bank:• Greentech Fund: First year return is 4% per year, and this will increase by 1% each year for the next four years. Thereafter, returns will remain constant.• Net-zero Fund: Investment can only be made two years later (i.e., His money is in the bank for the first 2 years). When the investment is made, the return on the first three years is 6% per year and 12% per year thereafter.Interest of 3% per year (compounded monthly) can be earned if Eric deposits her money in an OCBC savings account.Analyze which is a better investment product. You are required to show all relevant workings (b) SingLife is offering an endowment policy where Eric, aged 40 today, will need to make the following payments:• 41st…
Suppose you invest $5,000 into a mutual fund that is expected to earn a rate of return of 7%. The amount of money you will have in 10 years is closest to which of the following? The amount you will have in 25Lyears is closest to which of the following? O 1) $53,500; $802,500 O 2) $2,552.56; $3,257.79 O 3) $9,835.76; $27,137.16 O 4) $3,138; $ 1,311,892 5) None of the answers are correct
7. If you have been saving money since you were 20 years old and you save $4 daily and, at the end of the year, you invest it all in a mutual fund account that has a 7% annual return, determine the balance of the account when you reach age 62.
You are going to invest in a stock mutual fund with a front-end load of 5.5 percent and an expense ratio of 1.41 percent. You also can invest in a money market mutual fund with a return of 2.5 percent and an expense ratio of 0.40 percent. If you plan to keep your investment for 2 years, what annual return must the stock mutual fund earn to exceed an investment in the money market fund? What if your investment horizon is 10 years? (Do not round intermediate calculations. Enter your answers as a percent rounded to 2 decimal places.)
You are 22 years old and you want to have $1 million in your retirement account at age 50. How much money do you need to invest each year (to the nearest $100), if you can get an 8% annual rate of return on mutual funds that invest in S&P 500 stocks? OA $35,700 OB.$10,500 OC. $15,600 O D. $20,600 Reset Selection
4. Suppose a (very skilled) fund manager earns a safe return of 0.7% pertrading day. There are 252 trading days per year. (a) What will be your annualized holding period return on $100 invested in the fundif the manager allows you to reinvest in her fund the 0.7% you earn each day? (b) What will be your annualized holding period return assuming the manager putsall of your daily earnings into a zero-interest-bearing checking account and paysyou everything earned at the end of the year?

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