A young couple is planning for the education of their two children. They plan to invest the same amount of money at the end of each of the next 16 years, i.e., the first contribution will be made at the end of the year and the final contribution will be made at the time the oldest child enters college.
The money will be invested in securities that are certain to earn a return of 8 percent each year. The oldest child will begin college in 16 years and the second child will begin college in 18 years. The current cost of one year of college is $10,000 and the parents anticipate college costs will grow at the rate of 8 percent per year through the period when the second child finishes college. These costs must be paid at the beginning of each year. If each child takes four years to complete their college degrees, then how much money must the couple save each year?
I am getting PMT as $9038.15
Today is John’s 30th birthday. Five years ago, Rachel opened a brokerage account when her grandmother gave her $20,000 for her 25th birthday. John added $2,000 to this account on her 26th birthday, $2,500 on her 27th birthday, $3,000 on her 28th birthday, and $5,000 on her 29th birthday. John’s goal is to have $400,000 in the account by her 45th birthday.
Starting today, she plans to contribute a fixed amount to the account each year on her birthday. She will make 15 contributions, the first one will occur today, and the final contribution will occur on her 45th birthday. Complicating things somewhat is the fact that Rachel plans to withdraw $25,000 from the account on her 35th birthday to finance the down payment on a home. How large does each of these 15 contributions have to be for John to reach her goal? Assume that the account has earned, and will continue to earn, an effective return of 10 percent a year.
I am getting PMT as $16,806.25
The money will be invested in securities that are certain to earn a return of 8 percent each year. The oldest child will begin college in 16 years and the second child will begin college in 18 years. The current cost of one year of college is $10,000 and the parents anticipate college costs will grow at the rate of 8 percent per year through the period when the second child finishes college. These costs must be paid at the beginning of each year. If each child takes four years to complete their college degrees, then how much money must the couple save each year?
I am getting PMT as $9038.15
Today is John’s 30th birthday. Five years ago, Rachel opened a brokerage account when her grandmother gave her $20,000 for her 25th birthday. John added $2,000 to this account on her 26th birthday, $2,500 on her 27th birthday, $3,000 on her 28th birthday, and $5,000 on her 29th birthday. John’s goal is to have $400,000 in the account by her 45th birthday.
Starting today, she plans to contribute a fixed amount to the account each year on her birthday. She will make 15 contributions, the first one will occur today, and the final contribution will occur on her 45th birthday. Complicating things somewhat is the fact that Rachel plans to withdraw $25,000 from the account on her 35th birthday to finance the down payment on a home. How large does each of these 15 contributions have to be for John to reach her goal? Assume that the account has earned, and will continue to earn, an effective return of 10 percent a year.
I am getting PMT as $16,806.25