1)You have some money on deposit in a bank account which pays a nominal (or quoted) rate of 8.0944 percent, but with interest compounded daily (using a 365-day year). Your friend owns a security which calls for the payment of $10,000 after 27 months. The security is just as safe as your bank deposit, and your friend offers to sell it to you for $8,000. If you buy the security, by how much will the effective annual rate of return on your investment change?

2)1)The parents want to calculate the cost of sending their newborn child to college. The child will attend four years of college at 18-21 years of age. The parents are planning to retire at the same time that the child goes off to college, so they want to have enough put aside by that time to provide for the child's education.

*Current cost of tuition is $11,000 per year

Tuition is expected to increase 3% annually

The parents expect that they can earn 5% on investments for their financial instruments

All work must be shown (in formula format )

1. How much will tuition cost each year the child is in college? At age 18,19,20,21

2. How much needs to be accumulated by the time the child goes to college?

3. If the parents want to fund the tuition for the 4 years, how much would need to be deposited today in the instrument to be able to pay for all 4 years of college?