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On December 23, 2020, you had a child and you decide to invest in an RESP. The federal government gives you a 20% grant for
On December 23, 2020, you had a child and you decide to invest in an RESP. The federal government gives you a 20% grant for a maximum of $ 500 / year and $ 7,200 for the person's lifetime. The provincial gives you 10% subsidy for a maximum of $ 250 / year and $ 3,600 for the lifetime of the person. Investments return 4% annually and based on the past 10 years average inflation would be 1.69% per year. To simplify the problem, grants are deposited at the same time as your deposits. a) How much should you put in annually in order to maximize the grants? b) How much would your child have in their RESP at the end of the year they turn 18? c) If at the age of 18, your child wants to buy a building and he has to put down a 10% down payment, what is the maximum value of the building that he could buy in terms of today (in inflation)?
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