Question
Hannah is 8-years old and does extremely well at school. Her parents anticipate that she will attend four years of University or college when she
Hannah is 8-years old and does extremely well at school. Her parents anticipate that she will attend four years of University or college when she turns 18. Her parents would like to start putting money away for her education. She is their only child and they want to pay for her education in full.
They believe the current cost of University is $10,000 per year for students that are going away to school. The cost of education has been increasing at a rate of 3% each year. They plan to invest in a balanced portfolio and assume they can earn 5% compounded annually on their investments. They have a net family income of $150,000 per year.
a) What type of plan would you recommendation to Hannah's parents? Explain. (1 marks)
b) How much money will Hannah need when she starts school? (4 marks)
c) How much would they have to save each month to meet their goal? (3 marks)
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