Mr. S. P. Johnson is creating a college fund for his daughter. He plans to make...

Mr. S. P. Johnson is creating a college fund for his daughter. He plans to make 7-yearly payments of $10,000 each with the first payment deposited today on his daughter’s 6th birthday (happy birthday!) Assuming his daughter will need three equal withdrawals from this account to pay for her law-school education beginning when she is twenty-two (i.e. 22, 23, 24), how much will she have on a yearly basis for her law school career? Mr. Johnson expects to earn a constant 10% annual return for the time interval of this problem.

Expert Solution

Particulars	Amount
Annual payment	$ 10,000
× FVAF for 7 payments	10.435888
Future value by age 12	$ 104,358.88
× FVF until age 22	2.59374
Future value by age 22	$ 270,680.06
× PMT factor for 3 years	0.36556
Annual return	$ 98,949.51

Answer is 98,949.51

jeff jeffy answered 1 year ago

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