Juanita Domingo's parents want to establish a college trust for her. They want to make 16...

Juanita Domingo's parents want to establish a college trust for her. They want to make 16 quarterly withdrawals of $2000, with the first withdrawal 3 months from now. If money is worth 6.8%, compounded quarterly, how much must be deposited now to provide for this trust?

It is an ordinary annuity.

Solutions

Expert Solution

Present Value Of An Annuity

= C*[1-(1+i)^-n]/i]

Where,

C= Cash Flow per period =$2000

i = interest rate per period =6.8%/4 =0.017%

n=number of period =16

= $2000[ 1-(1+0.017)^-16 /0.017]

= $2000[ 1-(1.017)^-16 /0.017]

= $2000[ (0.2364) ] /0.017

= $27,812.01

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Proud parents wish to establish a college savings fund for their newly born child. Monthly deposits...

Proud parents wish to establish a college savings fund for their newly born child. Monthly deposits will be made into an investment account that provides an annual rate of return of 4% compounded monthly. Four withdrawals from the savings fund will be made to pay for college expenses. The estimated need is $25,000 when the child turns 18 years old; $28,000 at 19 years; $31,000 at 20 years; and $34,000 at age 21. The last monthly payment to the investment...

Today is your cousin’s 12th birthday. Her parents are preparingto save for her college tuition....

Today is your cousin’s 12th birthday. Her parents are preparing to save for her college tuition. They decide that they will save the equal amount of $10,000 into a savings account, starting today and continuing every birthday up to and including her 20th birthday. Assume the savings account pays 7% interest compounded annually. If instead they gave a lump-sum amount TODAY, how much money will your cousin’s parents need to deposit in the account to give her to give the...

Melanie is a 16-year old who lived with her parents and two siblings in a suburban...

Melanie is a 16-year old who lived with her parents and two siblings in a suburban neighborhood until her parents separated 6 months ago. At that time her school performance began to decline and she was truant from school, frequently not returning home until after dark. when she arrived home,she was verbally abusive to her mother when asked where she had been. Three days ago, her relationship with her boyfriend of 1 year ended when he told her she had...

Janie graduates from high school in 2019 and enrolls in college in the fall. Her parents...

Janie graduates from high school in 2019 and enrolls in college in the fall. Her parents (who file a joint return) pay $14,350 for her tuition and fees. If required, round your computations to the nearest whole value. a. Assuming Janie's parents have AGI of $170,600, what is the American Opportunity tax credit they can claim for Janie? $ b. Assuming Janie's parents have AGI of $68,240, what is the American Opportunity tax credit they can claim for Janie? $...

Janie graduates from high school in 2017 and enrolls in college in the fall. Her parents...

Janie graduates from high school in 2017 and enrolls in college in the fall. Her parents (who file a joint return) pay $5,850 for her tuition and fees. If required, round your computations to the nearest whole value. a. Assuming Janie's parents have AGI of $167,800, what is the American Opportunity tax credit they can claim for Janie? $ b. Assuming Janie's parents have AGI of $67,120, what is the American Opportunity tax credit they can claim for Janie? $...

Janie graduates from highschool in 2019 and enrolls in college in the fall. Her parents (who...

Janie graduates from highschool in 2019 and enrolls in college in the fall. Her parents (who file a joint return) pay $12,225 for her tuition and fees. Assuming Janie's parents have AGI of $172,600, what is the American Opportunity tax credit they can claim for Janie?

Q3…Abbigail wish to establish a trust fund from which her daughter can withdraw $6,000 every six...

Q3…Abbigail wish to establish a trust fund from which her daughter can withdraw $6,000 every six months for 15 years, when she reach 16 years old. At the end of which time she will receive the remaining money in the trust, which you would like to be $25,000. The trust will be invested at 6% per annum compounded semi-annually. How large should the trust be? Q4…It is now January 1, 2018. You plan to make 5 deposits of $200 each,...

(TCO 5) Jane’s parents have created a savings account to save for her college education. If...

(TCO 5) Jane’s parents have created a savings account to save for her college education. If they invest $1,000 a year at 6% interest beginning on her first birthday, how much will be in the account when she reaches age 18? (TCO 5) You own a contract that promises an annuity cash flow of $250 year-end cash flows for each of the next 3 years. (Note: The first cash flow is exactly 1 year from today). At an interest rate...

29. LO.1, 3, 6 Terri, age 16, is a dependent of her parents in 2019. During...

29. LO.1, 3, 6 Terri, age 16, is a dependent of her parents in 2019. During the year, Terri earned $5,000 in interest income and $3,000 from part-time jobs. a. What is Terri’s taxable income? b. What is Terri’s net unearned income? c. What is Terri’s tax liability?

In 2017, Sheryl is claimed as a dependent on her parents’ tax return. Her parents’ ordinary...

In 2017, Sheryl is claimed as a dependent on her parents’ tax return. Her parents’ ordinary income marginal tax rate is 35 percent. Sheryl did not provide more than half her own support. What is Sheryl’s tax liability for the year in each of the following alternative circumstances? a) She received $7,000 from a part-time job. This was her only source of income. She is 16 years old at year-end. b) She received $7,000 of interest income from corporate bonds...

Subjects