Your son Tommy was just born today (Year O), and you are planning for his college education. You would like to make equal deposits every 26 weeks (assume a 52-week year) into a college savings account starting in Year 1 and ending in Year 21 (a total of 41 deposits), so that Tommy can make annual withdrawals in Year 18, 19, 20, and 21 for tuition. Tuition is currently (Year 0) $2,900/year, and it is expected to grow at 4%/year for each of the next 10 years, and then at 5%/year for all years after. You can earn a nominal annual rate of 8.45%, with interest compounded weekly (52-week year) in a college savings account. How much must each of the 41 deposits be to exactly fund the expected tuition expense? O $277.87 O $264.49 O $258.02 O $248.10 O $287.80
Your son Tommy was just born today (Year O), and you are planning for his college education. You would like to make equal deposits every 26 weeks (assume a 52-week year) into a college savings account starting in Year 1 and ending in Year 21 (a total of 41 deposits), so that Tommy can make annual withdrawals in Year 18, 19, 20, and 21 for tuition. Tuition is currently (Year 0) $2,900/year, and it is expected to grow at 4%/year for each of the next 10 years, and then at 5%/year for all years after. You can earn a nominal annual rate of 8.45%, with interest compounded weekly (52-week year) in a college savings account. How much must each of the 41 deposits be to exactly fund the expected tuition expense? O $277.87 O $264.49 O $258.02 O $248.10 O $287.80
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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Transcribed Image Text:Your son Tommy was just born today (Year O), and you are planning for his college education.
You would like to make equal deposits every 26 weeks (assume a 52-week year) into a
college savings account starting in Year 1 and ending in Year 21 (a total of 41 deposits), so
that Tommy can make annual withdrawals in Year 18, 19, 20, and 21 for tuition. Tuition is
currently (Year 0) $2,900/year, and it is expected to grow at 4% / year for each of the next 10
years, and then at 5%/year for all years after. You can earn a nominal annual rate of 8.45%,
with interest compounded weekly (52-week year) in a college savings account. How much
must each of the 41 deposits be to exactly fund the expected tuition expense?
O $277.87
O $264.49
O $258.02
O $248.10
O $287.80
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