Your parents are going to save money for your tuition fee payments. They started to do it when you were 12 years old. Assuming that you start your studies exactly at the age of 18 please calculate:
a) How much they should save quarterly (at the end of each period) if you pay tuition fee for the whole of your study in one payment at the beginning of the study? The tuition fee is 15000 PLN. The interest rate in the saving period is 4% with quarterly capitalisation. (3 points)
b) How the situation will change if you pay tuition fee yearly at the end of each year in the amount 5000PLN? The length of your study is 3 years, the interest rate in the study period is 5% (yearly capitalisation), the interest rate in the saving period is as in a). (4 points)
c) If instead of starting the study you decide to use your parents money to invest in “consol bond” with monthly coupon payment (perpetual bonds – the bonds that pay coupons from the capital infinite annuity payments), what the monthly payments will be at the beginning of each month? Assume that interest rate in the period of coupon payments (forever) is 3%.

Answer rating: 100% (QA)

By using Present value factors we can calculate how much parents needs to be save for 3 years of coa... View the full answer