FINA110.docx - http/www.utar.edu.my/fbf/file/[email protected]

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http://www.utar.edu.my/fbf/file/[email protected] Timothy has three children aged 5, 10 and 13. He wishes to plan for their education. He agrees that a certain sum must be accumulated before each of them reaches eighteen. He calculates that RM 100,000 per child would suffice to fund each one’s full education and living costs. Any future increase of cost due to inflation or monetary conditions will be covered by loans. He believes a steady monthly savings program is preferable and he expects the rate of return on his investments to be 5%. • Required: Prepare an accumulation schedule showing the amount and timing of savings for all three children as they reach eighteen. Education Funding A simple case – you might think! Steps in the process 1. Draw a timeline with all the relevant dates. – Current age of client, savings accumulation period, lump sum usage period, number of children involved and the accumulation period for each child 2. Determine the lump sum targets. – Lump sum depends on the period of use, whether the impact of inflation is taken into account,
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