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Joe and June Green are planning for their children's college education.




1.;Joe and June Green are planning for their children's college education. Joe would;like his kids to attend his alma mater where tuition is currently $25,000 per year. Tuition;costs are expected to increase by 5% each year. Their children, David and Daniel, just;turned 2 and 3 years old today, September 1, 2014. Each child is expected to begin;college the year in which he turns 18 years old and each will complete their schooling in;four years. College tuition must be paid at the beginning of each school year on August;31.;Grandma Green invested $10,000 in a mutual fund the day each child was born;that is, she deposited $10,000 on the day David was born and another $10,000 on;the day Daniel was born. This was to begin the boys' college fund (a combined;fund for both children). The mutual fund investment has earned and is expected;to continue to earn 8% per year. Joe and June will now begin adding to this fund;every August 31st (beginning with August 31, 2015) to ensure that there is enough;money to send the kids to college.;(a) How much money must Joe and June put into the college fund each of the;next 15 years if their goal is to have enough money in the investment account;by the time Daniel (the oldest son) begins college?;(b) Joe is worried that he and June cannot afford to contribute to the college fund;right away. He suggests waiting a few years before making the equal annual;contributions. If Joe and June begin making deposits on August 31, 2018;rather than August 31, 2015, how much higher with their annual deposits have;to be?;(c) If the mutual fund earns 7.6% compounded monthly, will the amount required;in part (a) be higher or lower? Support your answer;2 Jason borrows $50,000 from his father and promises to pay it back over the next 10;years, making equal annual payments at the end of each year.;(a) What is the amount of each payment if the annual interest rate is 9%?;(b) How much of the year two payment goes to pay interest and how much goes to;pay back part of the loan?;3 You decide to save for retirement and you want to have $50,000 per year starting on;your 65th birthday and ending on your 89th birthday. You also want to take a;spectacular trip on your 75th birthday that will cost $40,000. You are 25 years old;today and want to save equal annual amounts beginning today and ending on your;64th birthday. If you can earn 9% per year on your investments, how much must you;save each year so you will have sufficient funds for your retirement and your trip?;View Full Attachment


Paper#29259 | Written in 18-Jul-2015

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