You have two 8-years old twin children, and you anticipate that when they will turn 18 (exactly 10 years from now) they will need $500,000 to cover living and tuition college expenses. Suppose that the discount rate is 10%. 1. If you want to meet this negative cash flow only with current savings, how much would you need to set aside right now? 2. Suppose, instead, that want to meet this negative cash flow only saving a constant amount at the end of each year, for the next 10 years. What is the amount you should set aside each year?

You have two 8-years old twin children, and you anticipate that when they will turn 18 (exactly 10 years from now) they will need $500,000 to cover living and tuition college expenses. Suppose that the discount rate is 10%. 1. If you want to meet this negative cash flow only with current savings, how much would you need to set aside right now? 2. Suppose, instead, that want to meet this negative cash flow only saving a constant amount at the end of each year, for the next 10 years. What is the amount you should set aside each year?

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter2: Using Financial Statements And Budgets

Section: Chapter Questions

Problem 6FPE

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