A) When Liam Corbett was born, his grandparents opened a 529 college savings plan for him so that he had enough money to pay for college once he turned 18. His college education is expected to cost $225,000 on the day he turns 18 years old. Determine if there will be enough in the account given the following assumptions (Show your calculations): Assumption #1: The grandparents contribute $6,200 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 2: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 3: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 9%. Assumption #4: The grandparents contribute $8,500 per year starting the day Liam is born and the account earns an average annual rate of return of 4%. Assumption # 5: The grandparents contribute $9,500 per year starting the day Liam is born until his ninth birthday and make no further contributions until his 18th birthday. The account earns an average annual rate of return of 7%. In each case calculate how much the account will be over or short of the $225,000 goal. Make sure all dollar amounts are rounded to the nearest dollar.
A) When Liam Corbett was born, his grandparents opened a 529 college savings plan for him so that he had enough money to pay for college once he turned 18. His college education is expected to cost $225,000 on the day he turns 18 years old. Determine if there will be enough in the account given the following assumptions (Show your calculations): Assumption #1: The grandparents contribute $6,200 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 2: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 3: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 9%. Assumption #4: The grandparents contribute $8,500 per year starting the day Liam is born and the account earns an average annual rate of return of 4%. Assumption # 5: The grandparents contribute $9,500 per year starting the day Liam is born until his ninth birthday and make no further contributions until his 18th birthday. The account earns an average annual rate of return of 7%. In each case calculate how much the account will be over or short of the $225,000 goal. Make sure all dollar amounts are rounded to the nearest dollar.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:A) When Liam Corbett was born, his grandparents opened a 529 college savings plan for
him so that he had enough money to pay for college once he turned 18. His college
education is expected to cost $225,000 on the day he turns 18 years old. Determine if
there will be enough in the account given the following assumptions (Show your
calculations):
Assumption #1: The grandparents contribute $6,200 per year starting the day Liam is
born and the account earns an average annual rate of return of 7%.
Assumption # 2: The grandparents contribute $5,000 per year starting the day Liam is
born and the account earns an average annual rate of return of 7%.
Assumption # 3: The grandparents contribute $5,000 per year starting the day Liam is
born and the account earns an average annual rate of return of 9%.
Assumption #4: The grandparents contribute $8,500 per year starting the day Liam is
born and the account earns an average annual rate of return of 4%.
Assumption # 5: The grandparents contribute $9,500 per year starting the day Liam is
born until his ninth birthday and make no further contributions until his 18th birthday.
The account earns an average annual rate of return of 7%.
In each case calculate how much the account will be over or short of the $225,000 goal.
Make sure all dollar amounts are rounded to the nearest dollar.
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