Question

# 1. Your younger sister, Barbara, will start college in five years....

1. Your younger sister, Barbara, will start college in five years. She has just informed your parents that she wants to go to Eastern University, which will cost \$46,000 per year for four years (assumed to come at the end of each year). Anticipating Barbara's ambitions, your parents started investing \$2,000 per year five years ago and will continue to do so for five more years. Use 12 percent as the appropriate interest rate throughout this problem.

Barbara is now 18 years old (five years have passed), and she wants to get married instead of going to school. Your parents have accumulated the necessary funds for her education.

Instead of her schooling, your parents are paying \$26,000 for her upcoming wedding and plan to take a year-end vacation costing \$19,000 per year for the next 3 years.

a. How much will your parents have at the end of 3 years to help you with graduate school, which you will start then?

b. You plan to work on a master's and perhaps a Ph.D. If graduate school costs \$38,453 per year, approximately how long will you be able to stay in school based on these funds?

2. You are the chairperson of the investment fund for the Middle Hockey League. You are asked to set up a fund of quarterly payments to be compounded quarterly to accumulate a sum of \$470,000 after 10 years at an 8 percent annual rate (40 payments). The first payment into the fund is to occur three months from today, and the last payment is to take place at the end of the tenth year.

a. Determine how much the quarterly payment should be.

b. On the day after the sixteenth payment is made (the end of the fourth year) the interest rate goes up to a 12 percent annual rate, and you can earn a 12 percent annual rate on funds that have been accumulated as well as all future payments into the fund. Interest is to be compounded quarterly on all funds. Determine how much the revised quarterly payments should be after this rate change (there are 24 payments and compounding dates). The next payment will be in the fourth quarter of the fourth year.

Solved by verified expert

ff

ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit a

icitur laoreet. Nam risus ante, dapibus a molestie consequat, ultr

gue

at

onec aliquet. Lorem ipsum dolor sit amet, co

gue

itur laoreet. Nam risus ante, dapibus a molestie conseq

e vel laoreet ac, dictum vitae odio. Done

Explore over 16 million step-by-step answers from our library

Step-by-step explanation

ipsum

a. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus effici

l

ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui le

l

o. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna.

gue

amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam ri

gue

, ult

ipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laor

l

ec facilisis. Pellentesque dap

l

itur laoreet.

a molest

sus ante,

, ultri

l

ipsum dolor sit amet, consectetur adipiscing

Donec aliquet. Lorem ipsum dolor sit amet, cons

Donec aliquet. Lorem ipsum dolor sit amet, cons

ipsum dolor sit amet, consectetur adipiscing elit. Nam

ec facilisis. Pell

ia pulvin

l

lestie consequat, ultrices ac magna. Fusce

gue

llentesque dapibus efficitur laoreet. Nam risus ante,

l

molestie consequat, ultrices ac m

l

icitur

l

ongue vel laoreet ac, dictum vitae

icitur laoreet. Nam risus a

fficitur laoreet. Nam risus ante, dap

ctum vitae odio. Don

ur laoreet. Nam risus ante,

l

ctum vitae odio. Donec aliquet. Lorem

l

m ipsum dolor sit amet, consectetur

l

l

amet, consectet

l

o. Donec aliquet. Lorem ipsum dolor

l

molestie consequat, ultrices ac m

l

tesque dapibus efficitur laoree

l

e vel laoreet