You decide to start saving for a three year university education for your child, that commences 15 years from today and is estimated to cost $21,000 each year (paid at the start of the year). How much do you have to deposit into a savings account each year to fund your child's education? Deposits are made at the end of each year and you invest for 15 years. Use a rate of 15% pa.

a. $1,158.88

b. $8,581.88

c. $1,851.88

d. $5,858.18

e. $8,158.81

Continue from last Q.

Your parents decide to help out by offering an alternative to funding your child's university education. They are able to give you a lump sum of $10,000 in 3 years. Calculate the equivalent annuity of this lump sum and compare this to the required deposits for 15 years. You can choose either your parent's lump sum or your original deposit plan, not both. Should you accept your parents alternative lump sum and if so, how much higher or lower is the equivalent annuity than the required annual deposit?

a. Accept parents offer, as it is -$34.41 than the deposit required.

b. Reject parents offer, as it is -$14.41 than the deposit required.

c. Reject parents offer, as it is +$43.41 than the deposit required.

d. Accept parents offer, as it is +$14.41 than the deposit required.

e. Accept parents offer, as it is +$43.41 than the deposit required.

f. Reject parents offer, as it is -$34.41 than the deposit required.