Question 3

Cornell and Chantelle recently had their first child. They're excited about building their family together. Chantelle wants to begin a college savings fund for their child immediately, whereas Cornell wants to wait a few years (he'd like to use extra cash flow to buy a new minivan and some household items instead). Chantelle has identified a college savings plan that provides a relatively high rate of return for those who start saving early. The plan is set up so that over time the allocation of stocks in the plan falls as the child gets closer to college age and the allocation to bonds is increased. This means that the expected rate of return also falls over time. The rate of return figures Chantelle obtained from the savings plan are as follows