Stacey Derringer is divorced and has two sons, ages five and six. Her ex-husband is paying $100 per child per week in child support. Now that her sons are in school full-time, Stacey has returned to work as an office manager with a salary of $50,000 per year. Since her income is enough to support the family, she has decided to put the child support money in a college fund for the boys. For the last year, shes been depositing the money into a savings account, earning only 1 percent annual interest, and shes accumulated $10,600. She realizes she needs to invest this money to earn a better return.

-Stacey is considering keeping the money in a bank savings account that earns 1 percent after taxes. Assuming that Staceys ex-husband will continue to pay the same amount of child support for each son until they reach the age of 18, calculate how much Stacey will be able to accumulate using this investment strategy. For ease of computation, you can assume end-of-year child support payments of $5,200 per year for each child. What is the risk of this type of investment strategy? Explain.

-What difference would it make if Stacey chose to invest in a balanced mutual fund that earns 6 percent after taxes? Assuming that Staceys ex-husband will continue to pay the same amount of child support for each son until they reach the age of 18, calculate how much Stacey will accumulate. For ease of computation, you can assume end-of-year child support payments of $5,200 per year for each child.