Your son Bob is 14 years old today. You are planning for his college education. Bob will start school on his 19th birthday. You wish to set aside some money early to send Bob to four years of school. You have decided that you will give Bob $15,000 per year for each of his first two years of college, and $20,000 per year for each of his last two years of college. You will give these amounts to Bob at the beginning of each school year. You will make 5 equal annual deposits to fund the account. The first payment will be made one year from today and the last payment will be made the day Bob leaves for college. You wish to have just enough money in the bank to fund Bob’s entire education on the day that he leaves for school. Any money that is in the account will continue to earn interest while Bob is in school. Because of a new program, the bank has agreed to give you a 10 percent, nominal compounded annually, return on your investments throughout the entire time period. How much do you need to deposit into the account in each of the 5 years in order to fund Bob's education? Show your work to earn partial credit.

First, We need to compute the total amount required when BOB leaves for school. This can be computed…

one ecided that you will give Bob $15,000 per yE year for each of his last two years of colleE f each school year. You will make 5 equal a Il be made one year from today and the las wish to have just enough money in the bar

one ecided that you will give Bob $15,000 per yE year for each of his last two years of colleE f each school year. You will make 5 equal a Il be made one year from today and the las wish to have just enough money in the bar

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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