You have just married and are already worried about college for your kids even though you don't have any yet. Fortunately you have just inherited a large amount of money and plan to put some of it away for this purpose. Since you are willing to accept minimal risk on this investment, the most you can earn is 9.3%. The college education you want for your kids costs $94,000 today. You plan to have a child 2 years from now and another 5 years from now. Assume that all the money will be needed when the children turn 18. a. b. Ignoring inflation, how much would you have to invest now to pay for college for the 2 children? If you assume college costs will increase at about 10% per year, how much should you invest now?

You have just married and are already worried about college for your kids even though you don't have any yet. Fortunately you have just inherited a large amount of money and plan to put some of it away for this purpose. Since you are willing to accept minimal risk on this investment, the most you can earn is 9.3%. The college education you want for your kids costs $94,000 today. You plan to have a child 2 years from now and another 5 years from now. Assume that all the money will be needed when the children turn 18. a. b. Ignoring inflation, how much would you have to invest now to pay for college for the 2 children? If you assume college costs will increase at about 10% per year, how much should you invest now?

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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Your client has asked you what would be needed to fund your 2 children’s future college costs. Assume each child will begin college at age 18 and graduate in four years. Jamie is currently 14 years old and Johnny is currently 9 years old. Assume current costs are $24,000 per year and are expected to increase by 5% per year and investments earn 7%. Assuming no existing assets are dedicated to college, what is the annual savings required to fund the children’s education? Please include your calculator keystroke input for each step of this calculation.
You calculate that you will need $75,000 in ten years to be able to pay for your daughter's college education. If you invest $20,000 today, what rate of return will you need to achieve this goal? Select one: A. Between 12% and 13% B. Between 13% and 14% C. Between 14% and 15% D. Between 15% and 16%
You are graduating in two years and are thinking about your future. You know that you will want to buy a house five years after you graduate and that you will want to put down $50,000. As of right now, you have 8,000 in your savings account. You are also fairly certain that once you graduate, you can go work in the family business and earn $32,000 a year, with a 5 percent raise every year. You plan to live with your parents for the first two years after graduation, which will enable you to minimize your expenses and put away $10,000 each year. The next three years, you will have to live out on your own, as your younger sister will be graduating from college and has already announced her plan to move back in the family house. Thus, you will only be able to save 13 percent of your annual salary. Assume that you will be able to invest savings from your salary at 7.2 percent. At what interest rate you need to invest the current savings account balance at in order to achieve your goal? (If…
7) You are expecting twins and want to have $500,000 by the time your two kids go to college. You believe you can earn a return of 7%/year. You have nothing saved up. But you can contribute $8,000 each year going forward. How many years will it take you to grow your money to $500,000?
You want to begin saving for your daughter’s college education and you estimate that she will need R240 000 in 17 years. If you feel confident that you can earn 7.5% per year, how much do you need to invest today?
You are just starting your first job out of college. You and your best friend are competing to see who will have more in their savings when you retire; you both plan to retire at age 52, just 30 years out. You will need $5 million to retire. If you average an annual return of 7% on your investment, how much do you need to put into retirement savings on an annual basis?
You have discussed your retirement plans with your significant other and plan to move to a state with a lower cost of living upon retirement. You plan on living off $110,000 annually. You understand that your retirement account will likely yield a 5% return. Using the 4% Rule, how much money do you need in your retirement account upon retirement?
Assume that your parents wanted to have $160,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and eamed 12.5% per year on their investments. a. How much would they have to save each year to reach their goal? b. If they think you will take five years instead of four to graduate and decide to have $200,000 saved just in case, how much would they have to save each year to reach their new goal? Ⓒ a. How much would they have to save each year to reach their goal? To reach the goal of $160,000, the amount they have to save each year is $ (Round to the nearest cent.)
You are setting up an education fund for your new baby. You want your child to be able to withdraw the equivalent of $15,000 in today's dollars per year for each of the 5 years they will spend at University. You assume that they will begin at University on their 18th birthday, and you want to make the first yearly deposit on their first birthday and the last on their 18th birthday. If inflation is expected to be 7% and interest earned on your investments is expected to be 12%, what is the amount of the equal, annual deposits required?
You are thinking of building a new machine that will save you $3,000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 2% per year forever. What is the present value of the savings if the interest rate is 9% per year? The present value of the savings is $ (Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer. All parts showing Clear All Check Answer MacBook Air
(Use Calculator or Formula Approach) You want to begin saving for your daughters college education and you estimate that she will need $150,000 in 17 years. If you feel confident that you can earn 8% per year, how much do you need to invest today?
you estimate that you will need about $80,000 to send your child to college in eight years.Y ou have about $35,000 now.If you can earn 20 percent per year,will you make it? At what rate will you just reach your goal?

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