Question 2

Jim is going to establish a University Fund for his daughter Jennifer, who is two year's old.He plans to make the first deposit of $10,000 today and make another 5 annual deposits of this amount. After this, annual deposits of $15,000 will be made until Jennifer's 17th birthday. Given the long term nature of the investment, Jim anticipates an 4% pa return. The money is then to be transferred to an account for Jennifer on her 17th birthday and she will then withdraw the money in equal annual amounts for 6 years starting on her 18th birthday. Jennifer will only be able to earn 2% pa on her money.

(i) How much money will be available on Jennifer's 17th birthday?

(ii) Create schedule showing the cash inflows and outflows of this fund.How much will Jennifer be able to spend each year?

(Your answers should be accurate to the nearest dollar)