Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $16,500 a year, but they are expected to increase at a rate of 4.0% a year. Candice should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, Cameron and Diamond have accumulated $10,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $5,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Candice's anticipated college costs? O a. $10,202.60 O b. $8,079.29 O c. $7,171.90 O d. $8,806.43 O e. $9,360.18

Cameron and Diamond are saving for their daughter Candice's college education. Candice just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $16,500 a year, but they are expected to increase at a rate of 4.0% a year. Candice should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, Cameron and Diamond have accumulated $10,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $5,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Candice's anticipated college costs? O a. $10,202.60 O b. $8,079.29 O c. $7,171.90 O d. $8,806.43 O e. $9,360.18

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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