Question

In: Accounting

Suppose you borrow money from your parents for college tuition on January​ 1, 2015. Your parents...

Suppose you borrow money from your parents for college tuition on January​ 1, 2015. Your parents require four annual payments of​ $30,000 each, with the first payment due on January​ 1, 2019. They are charging you​ 4% annual interest. What is the cost of the college​ tuition?

A. $113,253

B. $96,809

C. $120,000

D. $89,707

Solutions

Expert Solution

Answer

First payment is due after 4 Years, so

Cost of Tuition = Present Value of Annual Payments

Year

PVF @ 4%

Repayment

Present Value

1

0.962

                       -  

                        -   

2

0.925

                       -  

                        -   

3

0.889

                       -  

                        -   

4

0.855

             30,000

       25,644.126

5

0.822

             30,000

       24,657.813

6

0.790

             30,000

       23,709.436

7

0.760

             30,000

       22,797.534

Total

       96,808.909

Answer = B

Dear Student, if u have any doubt, plz feel free to reach me.

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Suppose you borrow money from your parents for college tuition on January​ 1, 2015. Your parents...
Suppose you borrow money from your parents for college tuition on January​ 1, 2015. Your parents require four annual payments of​ $40,000 each, with the first payment due on January​ 1, 2019. They are charging you​ 8% annual interest. What is the cost of the college​ tuition?
You borrow $50,000 from your parents. The terms of the loan are that you will make...
You borrow $50,000 from your parents. The terms of the loan are that you will make equal payments back to your parents at the end of each of the next 4 years. If the interest rate on the loan is 3% calculate 1) the amount of each payment 2) the amount that you will pay in interest for the four years (total amount of interest). Verify your results by constructing an amortization table. 3) Calculate the payment if instead of...
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...
You borrow $20,000 from your parents to make a house down payment at a mutually agreedupon...
You borrow $20,000 from your parents to make a house down payment at a mutually agreedupon annual interest rate of 5%, and a payback period of 5 years (direct reduction loan). What will be your annual, or monthly, payment amounts?
Upon graduating from college, your parents host a graduation party in celebration for you at their...
Upon graduating from college, your parents host a graduation party in celebration for you at their house. 50 of your friends attend along with several family members and neighbors. At the end of the party everyone is departing the house. As the last guests filter out the front door, you thank them for attending and close the door. 3 minutes later you hear a loud knock on the front door. You open the door and see that one of your...
Upon graduating from college, your parents host a graduation party in celebration for you at their...
Upon graduating from college, your parents host a graduation party in celebration for you at their house. 50 of your friends attend along with several family members. At the end of the party everyone is departing the house. As the last guests filter out the front door, you thank them for attending and close the door. 3 minutes later you hear a loud knock on the front door. You open the door and see that one of your trusted friends...
You are planning to save for your retirement in 35 years and the college tuition for...
You are planning to save for your retirement in 35 years and the college tuition for your two children. Your current monthly salary is $9,000 per month and you expect your salary to keep pace with inflation. You expect inflation to be a 3.5 percent EAR for the rest of your life. You plan to deposit 12 percent of your salary each month into a retirement account. Additionally, your employer will deposit 4 percent of your salary into the account....
ICE13B - “How long will the money last?” You begin on 1 January 2015 by making...
ICE13B - “How long will the money last?” You begin on 1 January 2015 by making an initial deposit of $5,000 to open a savings account at Bank of Mason. This account pays 0.135% interest per month. Every even numbered month, you withdraw $500 to pay your tuition installment balance. At the end of December each year you receive a $2,000 end-of-year bonus from your employer which you deposit into your account. Run your simulation until your account balance goes...
Your son has been accepted into college. This college guarantees that your​ son's tuition will not...
Your son has been accepted into college. This college guarantees that your​ son's tuition will not increase for the four years he attends college. The first $11,000 tuition payment is due in six months. After​ that, the same payment is due every six months until you have made a total of eight payments. The college offers a bank account that allows you to withdraw money every six months and has a fixed APR of 6% (semiannual) guaranteed to remain the...
5. Suppose you borrow $300,000 for a home mortgage on January 1, 2020 with an annual...
5. Suppose you borrow $300,000 for a home mortgage on January 1, 2020 with an annual interest rate of 6% per year. The balance on the mortgage is amortized over 25 years with equal monthly payments at the end of each month. (This means the unpaid balance on January 1, 2045 should be $0). (a) What are the monthly payments? (b) How much interest was paid during the 25 years of the mortgage? (c) What is the unpaid balance on...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT