Craig and LaDonna Allen are trying to establish a college fund for their son Spencer, who just turned three today. They plan for Spencer to withdraw $10,000 on his eighteenth birthday and $11,000, $12,000, and $15,000 on his subsequent birthdays. They plan to fund these withdrawals with a 10-year annuity, with the first payment to occur one year from today, and expect to earn an average annual return of 8 %.
a. How much will the Allens have to contribute each year to achieve their goal?
b. Create a schedule showing the cash inflows (including interest) and outflows of this fund. How much remains on Spencer’s twenty-first birthday?

  • CreatedMarch 26, 2015
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