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you like you!), you are assuming the educa plan to put money into an investment a You believe that you will need about S no

you like you!), you are assuming the educa plan to put money into an investment a You believe that you will need about S no

FINANCIAL ACCOUNTING
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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4. Turton 4th, Prob. 9-18. You want to begin an investment plan to save for your daughter's college education. Because you believe that your newly born daughter will be a genius (just like you!), you are assuming the educational cost will be that of an Ivy League School. You plan to put money into an investment account, at the end of each year, for the next 18 years. You believe that you will need about $60,000 per year, each year, 19 through 22 years from now. a. Draw a discrete cash flow diagram for this situation. b. How much would you have to invest each year to pay for college and have a zero balance at the end of year 22? The effective annual interest rate of your investment is 8%. c. What interest rate would be needed if you could invest only $5000/yr?
Transcribed Image Text:4. Turton 4th, Prob. 9-18. You want to begin an investment plan to save for your daughter's college education. Because you believe that your newly born daughter will be a genius (just like you!), you are assuming the educational cost will be that of an Ivy League School. You plan to put money into an investment account, at the end of each year, for the next 18 years. You believe that you will need about $60,000 per year, each year, 19 through 22 years from now. a. Draw a discrete cash flow diagram for this situation. b. How much would you have to invest each year to pay for college and have a zero balance at the end of year 22? The effective annual interest rate of your investment is 8%. c. What interest rate would be needed if you could invest only $5000/yr?
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