Question

1. Jennifer just turned 23 and can save $500 per quarter, starting in three months. If Jennifer can earn 7% compounded quarterly, what age will she be when she accumulates $1,000,000?

2. In 4 years, your son will be entering college and you would like to help financially. You decide to create a college fund and make four annual deposits, starting now. In four years, you would like your son to be able to make four annual withdrawals of $7,500 from the fund (at the beginning of each year) that will cover his annual tuition. If the college fund earns 3.6% compounded annually, how much must you deposit at the beginning of each year? Assume tuition remains the same for the four years your son is attending college.

Answer 1

Question 1
APR=I ( quarterly)	7%
n= number of periods (quarterly)	4
X( number of years)	?
Equal payments made	500
FV	1000000
x*n	73.1430497	NPER formula in excel
total number of periods(n)	73.1430497
number of years(x)	18.29	years
present age of jennifer	23
total number years	41.29
After reaching at the age of 41.29 years she accumulate 1000000

Question 2 Cash flow diagram withdraw 7500 7500 7500 7500 1 2 3 4 1 2 3 4 770.42 770.42 770.42 770.42 PV

PMT	7500
APR=I or discount rate	3.60%
n= number of periods in year	1
X( number of years at begining )	4	years
PV of future cash flows after 4 years)	$28,472.20	PV formula in excel
now this amount FV to us (FV)	$28,472.20
amount to deposited each year	$7,770.24	PMT formula in excel
7770.24 Needs to be deposited at the beginning of each year