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In: Finance

6. Make sure that you draw a high quality, detailed timeline – similar in quality to...

6. Make sure that you draw a high quality, detailed timeline – similar in quality to those in Example 12 and Problem 15.

Assume that you wish to begin saving for your child’s college education via making deposits into an investment account that is expected to earn 8% per year for the first 14 years. After year 14, you will place the money in a less risky investment account that is expected to earn only 5% per year, for as long as you have money in the account.

You currently have $5,000 available, and you will deposit that amount into the savings account today. Thereafter you have decided to make savings deposits 3, 4, 5, … , 9 and 10 years from today. Each of these deposits will be larger than the prior deposit by 7%.  

You’ve estimated that one year of college will cost $52,000 in 18 years, and that the three subsequent years will each cost 5% more than the prior year.

A) Determine the size of the first deposit required at time 3. (Hint: The answer is NOT $9475.37. If you got this, you did not deal with the $5000 at t=0 at all. The correct answer is between $8600 and $8700).

Please help me this is urgent!!!

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jeff jeffy answered 4 weeks ago
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