Laura and Tommy want to make sure their newborn can attend college.They have seen estimates that the four-year cost of in-state colleges will be$160,000 in 18 years. They ask their financial advisor (they obviously didn'ttake this course) how much they need to save in an annuity each year overthat time if they invest at a fairly low-risk rate of six percent. What was theadvisor's answer (rounded to the nearest dollar)? Hint: remember thatdiscounting is the inverse of compounding.[submit your answer with a numerical value with a comma and no dollarsigns]

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Answered: Laura and Tommy want to make sure their…

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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Please help me
Tom and Mary James just had a baby. They heard that the cost of providinga college education for this baby will be $100,000 in 18 years. Tomnormally receives a Christmas bonus of $4,000 every year in the paycheckprior to Christmas. He read that a good stock mutual fund should pay himan average of 10 percent per year. Tom and Mary want to make sure theirson has $100,000 for college. Consider each of the following questions:a. How much must Tom invest in this mutual fund at the end of each year tohave $100,000 in 18 years?b. If the bonus is not paid until the first of the year, how much must Tominvest at the beginning of each year to have $100,000 in 18 years? c. Tom’s father said he would provide for his grandson’s education. He puts$10,000 in a government bond that pays 3 percent interest. His dad said thisshould be enough. Do you agree?d. If Mary has a savings account worth $50,000, how much must she withdrawfrom savings and set aside in this mutual fund to have the $100,000 for…
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