Question
Jim is going to establish a University Fund for his daughter Jan, who has just been born.He plans to make the first deposit of $20,000
Jim is going to establish a University Fund for his daughter Jan, who has just been born.He plans to make the first deposit of $20,000 today and make another 8 annual deposits of $5,000. After this, annual deposits of $10,000 will be made until Jan's 17th birthday. Given the long term nature of the investment, Jim anticipates a 5% pa return. The money is the transferred to an account for Jan and she will then withdraw the money in equal monthly amounts for 5 years starting on her 17th birthday. Jan will only be able to earn 3% pa on her money.
(i) How much will be available on Jan's 17th birthday, before the first withdrawal is made?
(ii) what is a schedule showing the cash inflows and outflows of this fund.How much will Jan be able to spend each month?
(Your answers should be accurate to the nearest dollar)
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