Fred and Sally Merrit recently inherited a substantial amount of money from a deceased relative. They want to use part of this money to establish an account to pay for their daughter’s college education. Their daughter, Lisa, will be starting college 5 years from now. The Merrits estimate that her first year in college expenses will amount to $12,000 and increase $2,000 per year during each of the remaining three years of her education. The following investments are available to the Merrits: Investment Available Matures Return at Maturity A Every year 1 year 6% B 1, 3, 5, 7 2 years 14% C 1, 4 3 years 18% D 1 7 years 65%

Fred and Sally Merrit recently inherited a substantial amount of money from a deceased relative. They want to use part of this money to establish an account to pay for their daughter’s college education. Their daughter, Lisa, will be starting college 5 years from now. The Merrits estimate that her first year in college expenses will amount to $12,000 and increase $2,000 per year during each of the remaining three years of her education. The following investments are available to the Merrits: Investment Available Matures Return at Maturity A Every year 1 year 6% B 1, 3, 5, 7 2 years 14% C 1, 4 3 years 18% D 1 7 years 65%

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 34P

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Fred and Sally Merrit recently inherited a substantial amount of money from a deceased relative. They want to use part of this money to establish an account to pay for their daughter’s college education. Their daughter, Lisa, will be starting college 5 years from now. The Merrits estimate that her first year in college expenses will amount to $12,000 and increase $2,000 per year during each of the remaining three years of her education. The following investments are available to the Merrits: Investment	Available	Matures	Return at Maturity
A	Every year	1 year	6%
B	1, 3, 5, 7	2 years	14%
C	1, 4	3 years	18%
D	1	7 years	65%