Jason, age 14, was given a choice of $60,000 to be deposited in his account today...

 

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Jason, age 14, was given a choice of $60,000 to be deposited in his account today or his parents would fund 80% of lump sum cost of 4 years of college. The first year of his college cost when he turns 18 is expected to amount to exactly $30,000 a year (i.e., in future dollar terms). Which should he take given a 6 % after-tax investment return in both cases? Assume that the cost of education increases by 5% per year. Jason, age 14, was given a choice of $60,000 to be deposited in his account today or his parents would fund 80% of lump sum cost of 4 years of college. The first year of his college cost when he turns 18 is expected to amount to exactly $30,000 a year (i.e., in future dollar terms). Which should he take given a 6 % after-tax investment return in both cases? Assume that the cost of education increases by 5% per year.

Answer rating: 100% (QA)

Comparing Options for Jasons College Funding Heres a breakdown of both options for Jason considering ... View the full answer