You are planning for your child's future and would like to set up a savings account fortheir college tuition. You suspect that you don't want to make a lump sum, so youdecide to make equal monthly deposits. After calculating, you plan to have$100,000 in the account in 18 years. You found an account that gives 2% APRcompounded monthly. Find the amount of your monthly deposits needed to obtainyour projected future value.

Future value:Future value refers to the value of an investment at a specific date in the future,…

Answered: You are planning for your child's…

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8EA: You put $250 in the bank for S years at 12%. A. If interest is added at the end of the year, how...

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Similar questions

Suppose you have estimated that you will need $2,500 per month in your retirement to meet your expenses and live comfortably, and that you have found or chosen a fund (account) which pays monthly interest 4% APR . What principal, or balance, will your account need to maintain in order to be able to pay you this amount each month? Round/take your answer to the nearest cent.
You have recently adopted a child and are planning to save for her college education. You want to have $50,000 saved by the time she starts college in 18 years. If your savings account offers an annual interest rate of 3%, how much should you deposit each year in order to reach your goal?
You are planning on having your first child next month and your parents have told you that they are going to open an account with $3,000 on the day your child is born. The money is to be used for college. You plan to also put $1,500 of your own money into the same account on the day your child is born, and then another $1,500 into the account each year on your child's birthday, through his/her 18th birthday. If the account averages an 8% annual return, what will the account balance be on your child's 18th birthday? Please use appropriate excel formula and show how you arrived at your answer.
A couple wants to set up a college savings account for their grandchild. If the account earns 4.4% interest compounded quarterly, how much should they invest today so that the account will be worth $50,000 in 18 years? Round your final answer to two decimal places.
You estimate you need to supplement your social security payments with monthly withdrawals of $1,400.00 per month from a private investment account during the first 23 years of your retirement. Assuming you can earn annual returns of 5.2% in your investment account during your retirement years, how much money do you need to have accumulated in your investment account by the day you retire in order to fund the aforementioned monthly withdrawals?
You want to deposit sufficient money today into a savings account so that you will have $1,000 in the account three years from today. Compute the difference between the amount of money you should deposit today if you could earn 3.5 percent interest and the amount of money you should deposit today if you could earn 3 percent interest.
Suppose you wish to invest in an annuity so that you will have $120,000 at some future date for your child’s education. You call several institutions and find that the best interest rate is 5.85% compounded monthly. In addition, you wish to make $350 monthly installments, with payments made at the end of each period. If you expect to attain this goal and give your child the $120,000 by his/her 18th birthday, about how long after he/she is born do you need to start investing in the annuity? Type an explanation and/or the calculations used to arrive at your answer. Construct the payment schedule for the first 6 payments by filling in the table below: period interest cum. int. principal balance 0 1 2 3 4 5 6
You decide to set up a college fund for your 10-year-old child and plan to make annual deposits into the account each year on your child’s birthday. Because “other things” consistently use more of your money than anticipated, your deposits are actually somewhat erratic. One year even resulted in a withdrawal. The account earns 5% per year. Solve, a. How much is in the account immediately after the deposit on your child’s 18th birthday? b. How much would you have needed to deposit on each birthday to accumulate the same total if you had started on your child’s 10th birthday and made equal annual deposits with no withdrawals? c. How much would you have needed to deposit on each birthday to accumulate the same total if you had started on your child’s 1st birthdayand made equal annual deposits with no withdrawals?
Suppose you are 35 years old and would like to retire at age 65. Furthermore, you would like to have a retirement fund from which you can draw an income of $50,000 per year–forever!How much would you need to deposit each month to dothis? Assume a constant APR of 8% and that the compounding and payment periods are the same. To draw $50,000 per year, there must be $ in your savings account when you retire. You can reach your goal by making monthly deposits of $
You are planning to save for your retirement during the next 30 years. You want to be able to withdraw $120,000 from your savings account every year for the next 20 years after you retire. You plan to invest your savings in a local bank, which offers 8% APR compounded monthly, and make equal annual payments into this savings account. What amount should be deposited annually in this savings account in order to withdraw $120,000 every year after your retirement?
When your first child is born, you begin to save for college by depositing $500 per month in an account paying 12% interest per year. With a continuous stream of investment and continuous compounding, how much will you have accumulated in the account by the time your child enters college 18 years later? (Round your answer to the nearest cent.)$
You want to be able to withdraw $35,000 from your account each year for 20 years after you retire. If you expect to retire in 30 years and your account earns 7.9% interest while saving for retirement and 7.7% interest while retired:Round your answers to the nearest cent as needed.a) How much will you need to have when you retire?$b) How much will you need to deposit each month until retirement to achieve your retirement goals?$c) How much did you deposit into you retirement account?$d) How much did you receive in payments during retirement?$e) How much of the money you received was interest?

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