Assume that your child has just had her 10th birthday and that you are planning for...
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Assume that your child has just had her 10th birthday and that you are planning for her education. You have already opened up an educational investment plan (529 Plan) for her and currently (today) have a balance of $14,382.00. You now wish to make 8 additional annual payments to the investment plan on her 10th (today) through 17th birthdays to fund her college education. You expect tuition to be $16,000 for her first year of college (age 18), and then to grow each year, for the following three years, at annual rate of 5 percent. Also assume that you expect the educational investment plan to earn, on average, a nominal annual interest rate of 7.26 percent, where interest is compounded monthly. Given this information, determine how much each of your annual payments must be so that you will have exactly enough to furld her 4-years of tuition. Assume that your child has just had her 10th birthday and that you are planning for her education. You have already opened up an educational investment plan (529 Plan) for her and currently (today) have a balance of $14,382.00. You now wish to make 8 additional annual payments to the investment plan on her 10th (today) through 17th birthdays to fund her college education. You expect tuition to be $16,000 for her first year of college (age 18), and then to grow each year, for the following three years, at annual rate of 5 percent. Also assume that you expect the educational investment plan to earn, on average, a nominal annual interest rate of 7.26 percent, where interest is compounded monthly. Given this information, determine how much each of your annual payments must be so that you will have exactly enough to furld her 4-years of tuition.
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Answer rating: 100% (QA)
SOLUTION To calculate the required annual payments we need to first calculate the future value of the current balance in the 529 plan and the future v... View the full answer
Related Book For
Financial and Managerial Accounting
ISBN: 978-0132497978
3rd Edition
Authors: Horngren, Harrison, Oliver
Posted Date:
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