Question
You are a financial planner. Your clients primary saving objective is to provide for the college education of her two children. Her children are currently
You are a financial planner. Your clients primary saving objective is to provide for the college education of her two children. Her children are currently 4 and 6 years old. Assume that tuition will cost $30,000 per year for four years for each child. You will make the first tuition payment for the 6-year-old 12 years from today, and the first tuition payment for the 4-year-old 14 years from today. Regardless of the saving plan that you put into place, you believe it is reasonable to assume your client will earn an average annual return of 8% on her investments.
B. Assume your answer to Part A is $75,000. If your client currently has no money saved for her childrens college, how much must she deposit in each year to fund their education? Assume the first deposit is made today and the last deposit is made 11 years from today (for a total of 12 annual deposits). - PLEASE EXPLAIN FORMULA USED AND ALGEBRA PROCESS
Assume your answer to Part A is $75,000. Your client wants to deposit $6,000 today and is willing to grow that deposit amount by 10% in each of the next 11 years for a total of 12 deposits. (For example, next years deposit will be $6,600.) If she follows this saving plan, will she have saved enough for her childrens education? - PLEASE EXPLAIN FORMULA USED AND ALGEBRA PROCESS
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