John and Jane have been saving to pay for their daughter Macy's college education. Macy just turned 9 at (t-0), d she will be entering college 9 years from now (at t-9). College tuition and expenses are currently $20,000 a year, but they are expected to increase at a rate of 6% a year. Tuition and other costs will be due at the end of years 9, 10, 11 and 12. To fund the tuition, John and Jane plan to save $15,000 in their college savings account today (at t0). Additionally, they plan to save $5,000 in cach of the next 3 years (at t 1, 2, and 3). Then they plan to make S equal annual contributions in each of the following years, t4, 5, 6, 7 and 8. They expect their investment account to cam 10% How large must the annual payments at t-4, 5, 6, 7 and 8 be to cover Macy's anticipated college costa? $10,817.03
John and Jane have been saving to pay for their daughter Macy's college education. Macy just turned 9 at (t-0), d she will be entering college 9 years from now (at t-9). College tuition and expenses are currently $20,000 a year, but they are expected to increase at a rate of 6% a year. Tuition and other costs will be due at the end of years 9, 10, 11 and 12. To fund the tuition, John and Jane plan to save $15,000 in their college savings account today (at t0). Additionally, they plan to save $5,000 in cach of the next 3 years (at t 1, 2, and 3). Then they plan to make S equal annual contributions in each of the following years, t4, 5, 6, 7 and 8. They expect their investment account to cam 10% How large must the annual payments at t-4, 5, 6, 7 and 8 be to cover Macy's anticipated college costa? $10,817.03
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:John and Jane have been saving to pay for their daughter Macy's college education. Macy just turned 9 at (t-0), md
she will be entering college 9 years from now (at t-9). College tuition and expenses are currently $20,000 a year, but
they are expected to increase at a rate of 6% a year. Tuition and other costs will be due at the end of years 9, 10, 11
and 12.
To fund the tuition, John and Jane plan to save $15,000 in their college savings account today (att0). Additionally.
they plan to save $5,000 in cach of the next 3 years (at t-1, 2, and 3). Then they plan to make S equal annnal
contributions in each of the following years, t
How large must the annual payments att-4, 5, 6, 7 and 8 be to cover Macy's anticipated college conts?
4, 5, 6, 7 and 8. They expeet their investment account to cam 10%.
$10,817.03
$14,993.59
$12,127.51
$9,422.02
$13,323.61
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