Question
You just paid full tuition for your junior year in college. Your plan is to complete this year, then, for your last year in college
You just paid full tuition for your junior year in college. Your plan is to complete this year, then, for your last year in college (starting one year from now) you will need to pay that final year of undergrad tuition. THEN, after college, you plan to go through a 2-year MBA program (this is a way better plan than law school). Todays price is $11,000 for your senior year, and this payment is due one year from today, and the price is expected to increase 3% each year. Todays MBA price, per year, is $19,000, but we expect this MBA price to increase 4% per year for each of the next two years. Tuition for each MBA year is due at the start of each year (so the payments due for your MBA program come 2 and 3 years from now). Your uncle offers to put you through school, and he will do so by depositing a single lump sum in an investment account, today, which projects an 8% (APR) annual return. (7)
a. How large must your uncles deposit be?
b. How much will be in the account immediately after you make your second withdrawal (to pay the first year of MBA tuition)?
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