Julie is going to establish a University Fund for her daughter Jade, who has just been...

Julie is going to establish a University Fund for her daughter Jade, who has just been born. She plans to make the first deposit of $5,000 on Jade’s fourth birthday and make another 8 annual deposits of this amount. After this, annual deposits of $10,000 will be made until Jade’s 18^th birthday. Given the long term nature of the investment, Julie anticipates an 8% pa return. The money is the transferred to an account for Jade and she will then withdraw the money in equal annual amounts for 6 years starting on her 18^th birthday. Jade will only be able to earn 5% pa on her money.

(i) How much will be available on Jade’s 18^th birthday?

(ii) Create a schedule showing the cash inflows and outflows of this fund. How much will Jade be able to spend each year?

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Expert Solution

jeff jeffy answered 11 months ago

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