Mavis never went to university, so when her daughter, Charita was to go to university, Mavis wanted to ensure that she had sufficient savings. Charita starts university tomorrow. Mavis' goal is for savings today that cover four years of $25,000 per year for tuition (to be paid at the beginning of the year), plus a lump sum of $50,000 available at the beginning of the 5th year to cover further studies. How much does Mavis have in available funds, assuming a discount rate of 7%, compounded semi-annually? Question 8Select one: a. $128,431 b. $ 122,417 c. $125, 907 d. $124, 695

Mavis never went to university, so when her daughter, Charita was to go to university, Mavis wanted to ensure that she had sufficient savings. Charita starts university tomorrow. Mavis' goal is for savings today that cover four years of $25,000 per year for tuition (to be paid at the beginning of the year), plus a lump sum of $50,000 available at the beginning of the 5th year to cover further studies. How much does Mavis have in available funds, assuming a discount rate of 7%, compounded semi-annually? Question 8Select one: a. $128,431 b. $ 122,417 c. $125, 907 d. $124, 695

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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Parents wanted to save enough money to send their daughter to college. The parents were unable to save money right at birth but rather started saving money when she was 5 years old and will save until she is 18 years old. The parents would like to save up $75,000 to cover tuition and other expenses. How much would the parents need to save each month in order to meet this requirement Assume the parents save the money into an account that generated an interest of 2% per year O a $360 O b. 3370 Oc$400 Od $490
Alex wants to provide funding in the event of his death for his daughter Ellie, age 8, to attend four years of college, starting at age 18. The current annual cost of tuition is $20,000. Assume inflation of 6.5% and after-tax earnings of 7%. If Alex wants to have enough life insurance to assure adequate funds for Ellie when she begins college (should he die today), approximately how much insurance should he have for this need alone? (Round your answer to the nearest dollar.) A)$113,764 B)$75,806 C)$75,451 D)$79,441
Your grandmother loves you and wants you to get a graduate degree. She promises to pay you $1,225 right away and an equal amount every 6 months for the a total of 5 years to encourage you to continue your graduate education and get a Master of Business Administration (MBA) degree at Cal State LA. She really does love you. If you don’t spend any of the money amounts that she gives you, how much will you have accumulated at graduation if you could invest the funds at 5% compounded semiannually?
Isabel Lopez, from Lewiston, Idaho, is age 19, and she recently received an inheritance of $50,000 from her grandmother’s estate. She plans to use the money for the down payment on a home in ten years when she finishes her education. Right now the funds are in a savings account paying 1.0 percent APY. How much would Isabel have in ten years if instead she purchased a ten-year CD paying 3.0 percent?
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
Suzy wants to retire in 30 years. She expects to live 25 years after retirement. She prepares a savings plan to meet the objectives: First, after retirement she would like to be able to withdraw $20,000 per month. The first withdrawal will occur at the end of the first month after retirement. Second, she would like to leave her daughter a $500,000 inheritance. Lastly, she wants to set up a fund that will pay $5000 per month forever to her favorite charity after she dies. These payments will begin one month after she dies. All the monies earn 10% annual rate compounded monthly. How much will she have to save per month to meet these objectives? She wishes to make her first deposit from now and the last deposit on the day she retires.
Atita plans to gift $150,000 to her daughters as a gift in the future. She thinks it will help her daughter fulfil her dreams when she reaches her age to marry. Assume her daughter is 3 years old and may get married in her 20s. Assume that Atita has $30,000 and wishes to invest that in a financial asset with a 9% rate of return per annum. Required: How would you define the amount of $30 000 and $150 000 in terms of the time value of money? ANSWER a (i): (answer box will enlarge as you enter your response) How long will she have to wait until she reaches the goal of $150 000? ANSWER a (ii): Mark will receive $13,500 from his parent at the end of each year for five years. He plans to invest them in a financial asset with an interest rate of 7.5%. How much money…
Amanda Weet who is six years old has been gifted $100,000 (after-tax) towards a college fund. Her parents do not have the ability to add any other amounts to the fund and a good four-year college education will cost about $71,000 per-year in ten years from now. What rate of return should she earn to be able to withdraw $71,000 at the end of 10th, 11th, 12th, and 13th year respectively. (Hint: IRR problem, draw a time line)
James and Tanisha are saving for their daughter Nalah's college education. Nalah just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $16,000 a year, but they are expected to increase at a rate of 3.5% a year. Nalah should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, James and Tanisha have accumulated $14,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $6,000 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 10%. How large must the annual payments at t = 5, 6, and 7 be to cover Nalah's anticipated college costs? O a. $3,501.99 O O b.…
Johnny and June would like to begin saving for their children's college education. They have four kids, ages 1, 5, 11, and 14. Each child will begin college at 18 and attend a private university for four years. Tuition is currently $11,000 per year and is increasing at 5% per year. They can earn an after - tax rate of return of 9%. How much must they save at the end of each year if they would like to make the last payment at the beginning of their youngest child's last year of college?
In 9 years, David's child will go to university. David already has $5,800 set aside in the savings account but plans to contribute an additional $900 at the end of each year to this account for his children's education. He anticipates earning an annual return rate of 5% on his savings throughout that time (compounded annually). When his kid is ready to register for university, how much money will David have in this account? (Round time value factors to 3 decimal places and final answer to 2 decimal places. Omit the "$" sign in your response.)
John and Daphne are saving for their daughter Ellen's college education. Ellen just turned 10 (at t= 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $14,500 a year, but they are expected to increase at a rate of 3.5% a year. Ellen should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, John and Daphne have accumulated $14,000 in their college savings account (at t= 0). Their long-run financial plan is to add an additional $5,000 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Ellen's anticipated college costs? a. $3,326.86 b. $2,970.41 C.…

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