Prestigious University is offering a new admission and tuition payment plan for all alumni. On the birth of a child, parents can guarantee admission to Prestigious University if they pay the first year’s tuition. The university will pay an annual rate of return of 4.5% on the deposited tuition, and a full refund will be available if the child chooses another university. The tuition is $12,000 per year at Prestigious University and is frozen at that level for the next eighteen years. What would parents pay today if they just gave birth to a new baby and the child will attend college in eighteen years? How much is the required payment to secure admission for their child if the interest rate falls to 2.5%?
Answer to relevant QuestionsFill in the interest rate for the following tablea. Using the interest rate formula, r = (FV/PV)1/n – 1b. Using the time value of money keys or function from a calculator orspreadsheet.Fill in the number of periods for the following table.a. Using the waiting period formula, n = ln(FV/PV) / ln(1+r).b. Using the time value of money keys or function from a calculator orspreadsheet.In the chapter text, we dealt exclusively with a single lump sum, but often we may be looking at several lump-sum values simultaneously. Let’s consider the retirement plan of a couple. Currently, the couple has four ...If you increase the number of payments on an amortized loan, does the payment increase or decrease? Why or why not?Fill in the missing annuity in the following table for an ordinary annuitystream.
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