Daniel and Miray are saving for their daughter Nylah's college education. Nylah 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 $15,000 a year, but they are expected to increase at a rate of 4.0% a year. Nylah 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, Daniel and Miray have accumulated $16,000 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 8%. How large must the annual payments at t = 5, 6, and 7 be to cover Nylah's anticipated college costs? a. $4,087.47 b. $3,235.51 c. $4,414.47 d. $5,425.51 e. $5,859.55
Daniel and Miray are saving for their daughter Nylah's college education. Nylah 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 $15,000 a year, but they are expected to increase at a rate of 4.0% a year. Nylah 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, Daniel and Miray have accumulated $16,000 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 8%. How large must the annual payments at t = 5, 6, and 7 be to cover Nylah's anticipated college costs? a. $4,087.47 b. $3,235.51 c. $4,414.47 d. $5,425.51 e. $5,859.55
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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Transcribed Image Text:Daniel and Miray are saving for their daughter Nylah's college education.
Nylah 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 $15,000 a
year, but they are expected to increase at a rate of 4.0% a year. Nylah 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, Daniel and Miray have accumulated $16,000 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 8%. How large must the annual payments at t
= 5, 6, and 7 be to cover Nylah's anticipated college costs?
O a. $4,087.47
b. $3,235.51
C. $4,414.47
d. $5,425.51
e. $5,859.55
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