Question
Mr. Parker is creating a college fund for his daughter. He plans to make 13 yearly payments with the first payment today on his daughters
Mr. Parker is creating a college fund for his daughter. He plans to make 13 yearly payments with the first payment today on his daughters fifth birthday and to increase each payment by 5%. Also, He would expect to earn a 10% annual return on his investment and his daughter will need four withdrawals of $25,000 from this account to pay for her education beginning when she is 18 (i.e. 18, 19, 20, 21).
a. What is the initial deposit?
b. If he only earns 8%, what is the initial deposit?
c. Assume he earns 10% and makes the initial deposit from part a. Due to unforeseen circumstances, he has to stop depositing on her 12th Birthday. The money continues to grow and she begins withdrawing at age 18. What is the new about she can withdraw each of her four years of college?
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