effective annual interest rate is 6.65% and is nominal. a. Suppose the couple invests money on her birthday, starting today and ending one year before she starts university. How much must they invest each year to have money to send their daughter to university? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment per year s b. If the couple waits 1 year, until their daughter's 8th birthday, how much more do they need to invest annually? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Additional yearly payments s
effective annual interest rate is 6.65% and is nominal. a. Suppose the couple invests money on her birthday, starting today and ending one year before she starts university. How much must they invest each year to have money to send their daughter to university? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment per year s b. If the couple waits 1 year, until their daughter's 8th birthday, how much more do they need to invest annually? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Additional yearly payments s
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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![**Educational Investment Planning Exercise**
A couple has asked for help in planning for their daughter’s university education expenses. Their daughter, who is currently seven years old, is expected to start university in 10 years. The initial cost for a year at university is estimated at $16,500, covering tuition, books, accommodation, food, and clothing. The costs are likely to increase annually at an inflation rate of 5.4%. The effective annual interest rate is considered to be 6.65%.
**Exercise Details:**
- **a. Investment Over 9 Years:**
If the couple invests money each year on their daughter’s birthday, beginning now and finishing the year before she attends university, how much do they need to invest each year?
- **Investment per year:** $118
- **b. Delayed Investment:**
If they start investing a year later, on their daughter’s 8th birthday, how much more will they need to invest annually?
- **Additional yearly payments:** *[Answer to be calculated]*
**Instructions:**
- Use the given interest and inflation rates.
- Do not round intermediate calculations; final answers should be rounded to two decimal places.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F74a11a83-8ee9-44b3-9daf-b8840238100c%2F6d3f0828-7d89-4b06-9425-c4aa3c19826f%2Ff7muafu_processed.jpeg&w=3840&q=75)
Transcribed Image Text:**Educational Investment Planning Exercise**
A couple has asked for help in planning for their daughter’s university education expenses. Their daughter, who is currently seven years old, is expected to start university in 10 years. The initial cost for a year at university is estimated at $16,500, covering tuition, books, accommodation, food, and clothing. The costs are likely to increase annually at an inflation rate of 5.4%. The effective annual interest rate is considered to be 6.65%.
**Exercise Details:**
- **a. Investment Over 9 Years:**
If the couple invests money each year on their daughter’s birthday, beginning now and finishing the year before she attends university, how much do they need to invest each year?
- **Investment per year:** $118
- **b. Delayed Investment:**
If they start investing a year later, on their daughter’s 8th birthday, how much more will they need to invest annually?
- **Additional yearly payments:** *[Answer to be calculated]*
**Instructions:**
- Use the given interest and inflation rates.
- Do not round intermediate calculations; final answers should be rounded to two decimal places.
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