Johnny wants to save some money for his daughter Alexis's education. Tuition costs $12,500 per year in today's dollars. Alexis was born today and will go to school starting at age 18. She will go to school for 4 years. Johnny can earn 11% on his investments and tuition inflation is 7%. How much must Johnny save at the end of each year, if he wants to make his last savings payment at the beginning of his daughter's first year of college? O a. $2,694.56. b. $2,789.04. * OC $2,861.65. O d. $3,176.43.

Johnny wants to save some money for his daughter Alexis's education. Tuition costs $12,500 per year in today's dollars. Alexis was born today and will go to school starting at age 18. She will go to school for 4 years. Johnny can earn 11% on his investments and tuition inflation is 7%. How much must Johnny save at the end of each year, if he wants to make his last savings payment at the beginning of his daughter's first year of college? O a. $2,694.56. b. $2,789.04. * OC $2,861.65. O d. $3,176.43.

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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Similar questions

Your cousin is currently 12 years old. She will be going to college in 6 years. Your aunt and uncle would like to have $100,000 in a savings account to fund her education at that time. If the account promises to pay a fixed interest rate of 4.4% per year, how much money do they need to put into the account today to ensure that they will have $100,000 in 6 years?
Jinky has just completed a financial literacy class and she is following the advice on how to plan future purchases based on savings today. Jinky has a stable stream of income. She knows that every December, she receives Christmas bonus of which P20,000 can be set aside. She decides to finance her house and lot based on equity (personal money). How much more should she save monthly for 20 years if her investment earns a minimum of 12% per year?
Mr. J. J. Parker is creating a college fund for his daughter. He plans to make 15 yearly payments of $1500 each with the first payment deposited today on his daughter’s first birthday. Assuming his daughter will need four equal withdrawals from this account to pay for her education beginning when she is 18 (i.e. 18, 19, 20, 21), how much will she have on a yearly basis for her college career? J. J. expects to earn a hefty 12% annual return on his investment. (show work)
Your son just turned 4 years old. You anticipate he will start University when he turns 18. You would like to have funds in a registered education savings plan (RESP) to fund his education at that time. You anticipate he will spend 6 years in university, and it will cost $40,000 per year at the start of each school year. When he graduates (debt free) you would also like him to have $50,000 for a down payment on a condo or to travel. If the account promises to pay a fixed interest rate (APR) of 6% per year with monthly compounding, how much money do you have to deposit each quarter to ensure you will have enough when he starts university? Assume you will make the same deposit at the end of each quarter until he starts university.
The Calvarusos have decided to invest in a college fund for their young son. They invested $40,000 in a deferred annuity that will pay their son at the beginning of every month for 4 years, while he goes to college. If the account earns 2.50% compounded monthly and the annuity payments are deferred for 15 years, what will be the size of the monthly payments?
Isabelle wants to save for retirement. She earns $5400 in income each month, and wishes to deposit 10% of her income into a savings acount each month. If the savings account has a nominal interest rate of 7%, compounded monthly, how much will be in the account if she retires in 35 years? John won a lottery. After taxes, he was able to take home his winnings worth $510000. He decides to deposit 20% of this in a separate savings account for retirement. If the savings account has a nominal interest rate of 7%, compounded monthly, how much will be in the account if he retires in 35 years?
Jack wins a lottery. He now wants to put a fixed amount into a savings account paying j1= 4% to cover the university cost of his child 10 years from today. The costs are estimated to be $8500 for the first year, $8500(1.03) for 2nd year, $8500(1.03)2 for the 3rd year and in the fourth year $8500(1.03)3 . How much does Jack need to deposit today to cover the above cost, starting 10 years from today?
You want your daughter to be a millionaire. She is 3 years old today when you deposit $42,000 in an account that earns 8.2% per year. The funds in the account will be distributed to your daughter whenever the total reaches $1,000,000. How old will your daughter be when she gets the money?
out tion Johnny wants to save some money for his daughter Alexis's education. Tuition costs $12,500 per year in today's dollars. Alexis was born today and will go to school starting at age 18. She will go to school for 4 years. Johnny can earn 11% on his investments and tuition inflation is 7%. How much must Johnny save at the end of each year, if he wants to make his last savings payment at the beginning of his daughter's first year of college? O a. $2,694.56. b. $2,789.04. * $2,861.65. O d. $3,176.43. OC
6) Susan is looking to purchase her first home five years from today. The house costs $1,550,000. She will have to make a down payment of 10% of this amount and plans to take a loan from the bank for the difference. Bank charges are approximately 15% of the loan amount. She plans to start saving from today to cover both the down payment and the bank charges. a. How much will she need to save to cover both the down payment and bank charges? b. If she currently has $195,000 in her account and will make no further deposits over the next five years, what rate of interest must she earn on this account in order to achieve the savings target calculated in part (a) above?
Jan wants to plan for her daughter's education. Her daughter, Rachel was born today and will go to college at age 18 for five years. Tuition is currently $15,000 per year, in today's dollars. Jan anticipates tuition inflation of 6% and believes she can earn an 11% return on her investment. How much must Jan save at the end of each year, if she wants to make her last payment at the beginning of her daughter's first year of college? $4,680.37 $7,334.72 $3,882.03 $2,547.54
You are saving for the university education of your two children. They are two years apart in age; one will begin university 15 years from today and the other will begin 17 years from today. You estimate your children's university expenses to be $45,000 per year per child, payable at the beginning of each school year. The annual interest rate is 7.5 percent. Your deposits begin one year from today. You will make your last deposit when your older child enters university. Assume four years of university. How much money must you deposit in an account each year to fund your children's education? (Do not round intermediate calculations. Round the final answer to 2 decimal places. Omit $ sign in your response.) Annual savings $

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