You plan to save every year and accumulate $150,000 in 6 years to make the down payment for your house. To achieve your financial goal, you plan to make a deposit of $20,000 per year into a bank account paying 6% annual interest. The first deposit will be made a year from today. a. Draw a timeline to visualize the problem. b. Can you achieve your financial goal? (Show your work to answer this question) c. If not, what is the minimum deposit you need to make per year in order to achive your goal?

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
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7. You plan to save every year and accumulate $150,000 in 6 years to make the down
payment for your house. To achieve your financial goal, you plan to make a deposit
of $20,000 per year into a bank account paying 6% annual interest. The first deposit
will be made a year from today.
a. Draw a timeline to visualize the problem.
b. Can you achieve your financial goal? (Show your work to answer this question)
c.
If not, what is the minimum deposit you need to make per year in order to achive
your goal?
8. You are pursuing a Bachelor's in Finance at a business school, and you will need
$20,000 per year for the next 4 years to cover your college expenses. That is, you
plan to withdraw $20,000 at the end each of the next 4 years, starting one year
from today. To support your college education, your parents decide to make a
deposit today into a bank account paying an 8% annual interest. This deposit should
be sufficient to cover the four $20,000 withdrawals you will make over the next 4
years.
a. Draw a timeline to visualize the problem.
b. How much must the deposit be?
c. How much will be in the bank account immediately after you make the second
withdrawal?
Transcribed Image Text:7. You plan to save every year and accumulate $150,000 in 6 years to make the down payment for your house. To achieve your financial goal, you plan to make a deposit of $20,000 per year into a bank account paying 6% annual interest. The first deposit will be made a year from today. a. Draw a timeline to visualize the problem. b. Can you achieve your financial goal? (Show your work to answer this question) c. If not, what is the minimum deposit you need to make per year in order to achive your goal? 8. You are pursuing a Bachelor's in Finance at a business school, and you will need $20,000 per year for the next 4 years to cover your college expenses. That is, you plan to withdraw $20,000 at the end each of the next 4 years, starting one year from today. To support your college education, your parents decide to make a deposit today into a bank account paying an 8% annual interest. This deposit should be sufficient to cover the four $20,000 withdrawals you will make over the next 4 years. a. Draw a timeline to visualize the problem. b. How much must the deposit be? c. How much will be in the bank account immediately after you make the second withdrawal?
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