have a brilliant child who is five years old and will be attending a private college in thirteen years. You know that a four-year college now costs at least $25,000 per year, including tuition, books, and room and board. The cost of sending a child to college has increased by 9 percent per year, and you believe this will be true for the next thirteen ye How much will the annual tuition be when your child is eighteen? Assume tuition is paid the beginning of each year. How much money will you need to have in your investment account when your child begins college? (Hint: what is the present value of the four year college tuition?) If you can earn 11 percent on a mutual fund investment during the next thirteen years, how much will you have to invest at the beginning of each year to have enough to send your child to college for four years?
have a brilliant child who is five years old and will be attending a private college in thirteen years. You know that a four-year college now costs at least $25,000 per year, including tuition, books, and room and board. The cost of sending a child to college has increased by 9 percent per year, and you believe this will be true for the next thirteen ye How much will the annual tuition be when your child is eighteen? Assume tuition is paid the beginning of each year. How much money will you need to have in your investment account when your child begins college? (Hint: what is the present value of the four year college tuition?) If you can earn 11 percent on a mutual fund investment during the next thirteen years, how much will you have to invest at the beginning of each year to have enough to send your child to college for four years?
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:You have a brilliant child who is five years old and will be attending a private college in
thirteen years. You know that a four-year college now costs at least $25,000 per year,
including tuition, books, and room and board. The cost of sending a child to college has
increased by 9 percent per year, and you believe this will be true for the next thirteen years.
How much will the annual tuition be when your child is eighteen? Assume tuition is paid at
the beginning of each year. How much money will you need to have in your investment
account when your child begins college? (Hint: what is the present value of the four years of
college tuition?) If you can earn 11 percent on a mutual fund investment during the next
thirteen years, how much will you have to invest at the beginning of each year to have
enough to send your child to college for four years?
O Expected Annual Tuition = $72,376.77; Total amount of money needed to pay for four years of
tuition = $252,312.72; Amount needed to invest every year = $9,102.59
O Expected Annual Tuition = $76,645.12; Total amount of money needed to pay for four years of
tuition = $270,656.50; Amount needed to invest every year = $9,302.54
O Expected Annual Tuition = $78,218.28; Total amount of money needed to pay for four years of
tuition = $312,656.47; Amount needed to invest every year = $9,728.54
O Expected Annual Tuition = $67,565.75; Total amount of money needed to pay for four years of
tuition = $244,879.63; Amount needed to invest every year = $9,059.85
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