You are saving for your daughter's college fund 15 years in advance, and you want to...

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You are saving for your daughter's college fund 15 years in advance, and you want to have saved $50,000 in real amount by the time she attends college. Starting next year, you will deposit your money in Sandersons Bank that pays a nominal interest rate of 7% annually. The inflation rate is 5%. a. What is the real amount that you need to deposit each year to achieve your target? b. What is the real value of all your saving today? c. After doing some research, you found out that if you deposit the same real amount you found in (a) into a deposit account in Bright Bank, you could reach $50,000 (in real amount) by the end of the 11th year. What is the nominal interest rate offered by Bright bank? You are saving for your daughter's college fund 15 years in advance, and you want to have saved $50,000 in real amount by the time she attends college. Starting next year, you will deposit your money in Sandersons Bank that pays a nominal interest rate of 7% annually. The inflation rate is 5%. a. What is the real amount that you need to deposit each year to achieve your target? b. What is the real value of all your saving today? c. After doing some research, you found out that if you deposit the same real amount you found in (a) into a deposit account in Bright Bank, you could reach $50,000 (in real amount) by the end of the 11th year. What is the nominal interest rate offered by Bright bank?

Answer rating: 100% (QA)

a To find the real amount that needs to be deposited each year we can use the formula Real amount No... View the full answer