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son, age 14, was given a choice of $60,000 to be deposited ould fund 80% of lump sum cost of 4 years of college. The first year of his college cost e turns 18 is expected to amount to exactly $30,000 a year (i.e., in future dollar terms). W mould he take given a 6% after-tax investment return in both cases? Assume that the cost ducation increases by 5% per year. 80% of cost, since its future value would be $93,757 while that of deposit would be $75,749 O80% of cost, since its future value would be $117,196 while that of deposit would be $75,749 O deposit, since its future value would be $75,749 while that of 80% of cost would be

son, age 14, was given a choice of $60,000 to be deposited ould fund 80% of lump sum cost of 4 years of college. The first year of his college cost e turns 18 is expected to amount to exactly $30,000 a year (i.e., in future dollar terms). W mould he take given a 6% after-tax investment return in both cases? Assume that the cost ducation increases by 5% per year. 80% of cost, since its future value would be $93,757 while that of deposit would be $75,749 O80% of cost, since its future value would be $117,196 while that of deposit would be $75,749 O deposit, since its future value would be $75,749 while that of 80% of cost would be

Essentials Of Investments
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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Jason, age 14, was given a choice of $60,000 to be deposited in his account today or his parents would fund 80% of lump sum cost of 4 years of college. The first year of his college cost when he turns 18 is expected to amount to exactly $30,000 a year (i.e., in future dollar terms). Which should he take given a 6% after-tax investment return in both cases? Assume that the cost of education increases by 5% per year. 80% of cost, since its future value would be $93,757 while that of deposit would be $75,749 80% of cost, since its future value would be $117,196 while that of deposit would be $75,749 O deposit, since its future value would be $75,749 while that of 80% of cost would be $72,719 deposit, since its future value would be $100,998 while that of 80% of cost would be $93,757
Transcribed Image Text:Jason, age 14, was given a choice of $60,000 to be deposited in his account today or his parents would fund 80% of lump sum cost of 4 years of college. The first year of his college cost when he turns 18 is expected to amount to exactly $30,000 a year (i.e., in future dollar terms). Which should he take given a 6% after-tax investment return in both cases? Assume that the cost of education increases by 5% per year. 80% of cost, since its future value would be $93,757 while that of deposit would be $75,749 80% of cost, since its future value would be $117,196 while that of deposit would be $75,749 O deposit, since its future value would be $75,749 while that of 80% of cost would be $72,719 deposit, since its future value would be $100,998 while that of 80% of cost would be $93,757
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