Answered step by step
Verified Expert Solution
Question
1 Approved Answer
need solution You prepare yourself for the high costs of college tuition for your daughter. You expect her to start college in 18 years (t=18)
need solution
You prepare yourself for the high costs of college tuition for your daughter. You expect her to start college in 18 years (t=18) and expect her to be in college for 4 years. Today's tuition is $28,000 per year and tuition has increased historically at 6% per year and is expected to continue to grow at the same rate in the future. You want to make an initial deposit of $15,000 in a savings account, which is guaranteed to return 1.982% per year (APR) in interest, compounded monthly. Each year, until your daughter starts college you plan on depositing an equal amount that is precisely gets you to to make the tuition payments during the time your daughter attends college. Hence, your first deposit (not including the initial $15,000 ) takes place at t=1 and your final deposit takes place at t=17. Your first tuition payment occurs in t=18. If you could write one single check to payoff all the tuition at the time your daughter starts college (t=18), what is the correct amount for this check? [Question 5] Assuming you could pay all the tuition right now for your daughter's college education with a $350,000 check, would you do this (all else equal)? Explain your answer [Question 6] Following your original plan to make yearly equal deposits in years 1 through 17 , which will pay exactly for your daughter's college education, what is the amount of the deposit each year? [Question 7] Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started