Starting next year, your daughter Hessa will need $50,000 annually for 5 years to complete her Master’s degree in a field of dentistry, called orthodontics, at the New York University, USA. Therefore, exactly one year from today, Hessa will need to make her first withdrawal of $50,000.Since you like to plan your family’s finances well in advance, you have decided to deposit a specific amount today in a local HSBC branch, from which Hessa can receive the needed $50,000 every year. This bank account will be paying a 10% annual interest rate for the duration of your investment there. Using the relevant time value of money concepts, determine how large must this deposit has to be. Calculate how much money Hessa will have in her HSBC bank account right BEFORE she makes the first withdrawal. Estimate how much money Hessa will have in her HSBC bank account right AFTER she makes the first withdrawal. Compute how much money Hessa will have in her HSBC bank account right BEFORE she makes the last withdrawal.

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Answered: Starting next year, your daughter Hessa…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Starting next year, your daughter Hessa will need $50,000 annually for 5 years to complete her Master’s degree in a field of dentistry, called orthodontics, at the New York University, USA.
Therefore, exactly one year from today, Hessa will need to make her first withdrawal of $50,000.
Since you like to plan your family’s finances well in advance, you have decided to deposit a specific amount today in a local HSBC branch, from which Hessa can receive the needed $50,000 every year.
This bank account will be paying a 10% annual interest rate for the duration of your investment there.

Using the relevant time value of money concepts, determine how large must this deposit has to be.

Calculate how much money Hessa will have in her HSBC bank account right BEFORE she makes the first withdrawal.
Estimate how much money Hessa will have in her HSBC bank account right AFTER she makes the first withdrawal.
Compute how much money Hessa will have in her HSBC bank account right BEFORE she makes the last withdrawal.

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