Your cousin is currently 12 years old. She will be going to college in 6 years. Your aunt and uncle would like to have $90,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate 4.2% per year, how much money do they need to put into the account today to ensure that they will have $90,000 in 6 years?

Your cousin is currently 12 years old. She will be going to college in 6 years. Your aunt and uncle would like to have $90,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate 4.2% per year, how much money do they need to put into the account today to ensure that they will have $90,000 in 6 years?

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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2. (a) A college student, Amy, decides to fund a retirement account with $2000 per year for 8 years, with the first deposit made one year from today. The rate of return will be 10%. How much will she have in her account when she retires in 40 years? (b) Amy’s friend, Dacio, decides he will start funding his retirement account 8 years from now (first payment in 9 years). He then will invest $2000 each year for 32 years. If his rate of return is 10%, how much will he have when he retires in 40 years?
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The parents of a newborn decide to make deposits into an educational savingsaccount on each of their daughter's birthdays, starting with her first birthday.Assume that the educational savings account will return a constant 5.5% per year.The parents plan to deposit $2 200 on every of their daughter's future birthdays.How much money could they alternatively deposit on their daughter's birth date(today) to have the same amount available on her 18th birthday?
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A) When Liam Corbett was born, his grandparents opened a 529 college savings plan for him so that he had enough money to pay for college once he turned 18. His college education is expected to cost $225,000 on the day he turns 18 years old. Determine if there will be enough in the account given the following assumptions (Show your calculations): Assumption #1: The grandparents contribute $6,200 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 2: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 7%. Assumption # 3: The grandparents contribute $5,000 per year starting the day Liam is born and the account earns an average annual rate of return of 9%. Assumption #4: The grandparents contribute $8,500 per year starting the day Liam is born and the account earns an average annual rate of return of 4%. Assumption # 5: The grandparents contribute…
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