An engineer planning for her sons college education made deposits into a separate high-risk brokerage account every
Question:
Year Deposit, $
0.................................................5,000
3.................................................8,000
4.................................................9,000
7...............................................15,000
11.............................................16,000
17...............................................20,000
(a) If the account increased at 15% per year and inflation averaged 3% per year over the entire period, what was the purchasing power of the money in the account in terms of year zero CV dollars immediately after the last deposit in year 17?
(b) Use a spreadsheet to recalculate the purchasing power if the account actually earned 6% per year and inflation was higher than expected at 4% per year. Compare the purchasing power with the total amount deposited over the 17 years.
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