as à financial planner. A couple has asked you to put together an investment plan for the education of their daughter.She is a bright seven-year-old (her birthday is today), and everyone hopes she will go to university after high school in 10 years, on her17th birthday. You estimate that today the cost of a year of university is $16,500, including the cost of tuition, books, accommodation,food, and clothing. You forecast that the annual inflation rate will be 5.4%. You may assume that these costs are incurred at the start ofeach university year. A typical university program lasts 4 years. The effective annual interest rate is 6.65% and is nominal.a. Suppose the couple invests money on her birthday, starting today and ending one year before she starts university. How much mustthey invest each year to have money to send their daughter to university? (Do not round intermediate calculations. Round youranswer to 2 decimal places.)Investment per year $b. If the couple waits 1 year, until their daughter's 8th birthday, how much more do they need to invest annually? (Do not roundintermediate calculations. Round your answer to 2 decimal places.)Additional yearly payments $118

The time value of money recognizes the idea that the value of an amount of money today differs from…

effective annual interest rate is 6.65% and is nominal. a. Suppose the couple invests money on her birthday, starting today and ending one year before she starts university. How much must they invest each year to have money to send their daughter to university? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment per year s b. If the couple waits 1 year, until their daughter's 8th birthday, how much more do they need to invest annually? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Additional yearly payments s

effective annual interest rate is 6.65% and is nominal. a. Suppose the couple invests money on her birthday, starting today and ending one year before she starts university. How much must they invest each year to have money to send their daughter to university? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Investment per year s b. If the couple waits 1 year, until their daughter's 8th birthday, how much more do they need to invest annually? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Additional yearly payments s

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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SOLVE the following:i. Suppose that your five-year old daughter has just announced her desire toattend college. After some research, you determined that you will need aboutRM 100,000 on her 18th birthday to pay for four years of college. If you canearn 8% annually on your investments, how much do you need to invest todayto achieve your goal?ii. Suppose you have an extra RM100 today that you wish to invest in for oneyear. If you can earn 10% per annum on your investment, how much will youhave in one year?
You calculate that you will need $75,000 in ten years to be able to pay for your daughter's college education. If you invest $20,000 today, what rate of return will you need to achieve this goal? Select one: A. Between 12% and 13% B. Between 13% and 14% C. Between 14% and 15% D. Between 15% and 16%
You dream of endowing a chair in finance at the local university that will provide a salary of $150,000 per year forever, with the first cash flow to be one year from today. If the university promises to invest the money at a rate of 5.5% per year, how much money must you give the university today to make your dream a reality?
You recently got promoted at your job. You have since decided to buy your dream car and expect that it will cost you $94,000 seven years from today. After budgeting your expenses, you decide that you can save $9,000 per year at the beginning of each year. Given a market interest rate of 13%, will you be able to purchase your car at the end of year 7? Would you be able to afford it one year later? (Using financial calculator)
You are thinking of building a new machine that will save you $3,000 in the first year. The machine will then begin to wear out so that the savings decline at a rate of 2% per year forever. What is the present value of the savings if the interest rate is 9% per year? The present value of the savings is $ (Round to the nearest dollar.) Enter your answer in the answer box and then click Check Answer. All parts showing Clear All Check Answer MacBook Air
You are setting up an education fund for your new baby. You want your child to be able to withdraw the equivalent of $15,000 in today's dollars per year for each of the 5 years they will spend at University. You assume that they will begin at University on their 18th birthday, and you want to make the first yearly deposit on their first birthday and the last on their 18th birthday. If inflation is expected to be 7% and interest earned on your investments is expected to be 12%, what is the amount of the equal, annual deposits required?
Assume that your parents wanted to have $70,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 8.5% per year on their investments. a. How much would they have to save each year to reach their goal? b. If they think you will take five years instead of four to graduate and decide to have $110,000 saved just in case, how much would they have to save each year to reach their new goal? a. How much would they have to save each year to reach their goal? To reach the goal of $70,000, the amount they have to save each year is (Round to the nearest cent.)
Your client has asked you what would be needed to fund your 2 children’s future college costs. Assume each child will begin college at age 18 and graduate in four years. Jamie is currently 14 years old and Johnny is currently 9 years old. Assume current costs are $24,000 per year and are expected to increase by 5% per year and investments earn 7%. Assuming no existing assets are dedicated to college, what is the annual savings required to fund the children’s education? Please include your calculator keystroke input for each step of this calculation.
Assume that your parents wanted to have $150,000 saved for university by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 5.5% per year on their investments. a. How much would they have to save each year to reach their goal? b. If they think you will take five years instead of four to graduate and decide to have $190,000 saved, just in case, how much would they have to save each year to reach their new goal? a. To reach the goal of $150,000, the amount they have to save each year is $. (Round to the nearest cent.) Clear all
Assume that your parents wanted to have $160,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and eamed 12.5% per year on their investments. a. How much would they have to save each year to reach their goal? b. If they think you will take five years instead of four to graduate and decide to have $200,000 saved just in case, how much would they have to save each year to reach their new goal? Ⓒ a. How much would they have to save each year to reach their goal? To reach the goal of $160,000, the amount they have to save each year is $ (Round to the nearest cent.)
6) Your daughter is born today, and you want her to be a millionaire by the time she is 35 years old. You open an investment account that promises to pay 16% per year. How much money must you deposit each year, starting on her 1st birthday and ending on her 35th birthday, so your daughter will have $1,000,000 by her 35th birthday? N Year I/Y Cash flow 7) The present value of the following cash flow stream is $8,500 discounted at 10 percent annually. What is the value of the missing cash flow? 1,000 PV 1 ? PMT 2 2,000 FV 3 4,000 4
You are saving for the college education of your two children. One child will enter college in 5 years, while the other child will enter college in 7 years. College costs are currently $10,000 per year and are expected to grow at a rate of 5 percent per year. All college costs are paid at the beginning of the year. You assume that each child will be in college for four years. You currently have $50,000 in your educational fund. Your plan is to contribute a fixed amount to the fund over each of the next 5 years. Your first contribution will come at the end of this year, and your final contribution will come at the date at which you make the first tuition payment for your oldest child. You expect to invest your contributions into various investments which are expected to earn 8 percent per year. How much should you contribute each year to meet the expected cost of your children's education?

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