Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

John is looking at several options to fund his sons 4-year university degree. The university fees of $45,000 a year will have be paid starting

John is looking at several options to fund his sons 4-year university degree. The university fees of $45,000 a year will have be paid starting 11 years from today. He is analysing an insurance plan that pays out $45,000 a year for 4 years with the first payout 11 years from today. The insurance plan has several payment options:

Option 1 Pay $60,000 today. Option 2 Beginning 1 year from today, pay $12,000 a year for the next 8 years. Option 3 Beginning 1 year from today, make payments each year for the next 8 years. The first payment is $11,000 and the amount increases by 5% each year.

Can I have the cash flow time line for these 3 options with regards to calculating present value.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Stocks For The Long Run

Authors: Jeremy Siegel

6th Edition

1264269803, 978-1264269808

More Books

Students also viewed these Finance questions