Unformatted text preview: duate education. 9) Suppose that a young couple has just had their first baby and they wish to insure that enough money will be available to pay for their childʹs college education. They decide to make deposits into an educational savings account on each of their daughterʹs birthdays, starting with her first birthday. Assume that the educational savings account will return a constant 7%. The parents deposit $2000 on their daughterʹs first birthday and plan to increase the size of their deposits by 5% each year. Draw a timeline that details the amount that would be available for the daughterʹs college expenses on her 18th birthday. 3) Which of the following statements is false? A) The process of moving a value or cash flow backward in time is known as discounting. B) C
FV = (1 + r )n
C) The process of moving a value or cash flow forward in time is known as compounding. D) The value of a cash flow that is moved forward in time is known as its future value. 5) Consider the following timeline: If the current market rate of interest is 10%, th...
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- Fall '08
- Finance, Current market rate