Question

15 years from now, your 2-year old son will be attending Harvard. You have determined he...

15 years from now, your 2-year old son will be attending Harvard. You have determined he will need $85,000 per year for tuition and living expenses. In 15 years, you will give him a lump sum payment for the entire amount he will need, assuming that he will be able to invest the money not yet needed at 4.5% interest. You have found an investment opportunity that will yield an annual return of 6.5% on your monthly payments. How much will you have to invest each month to give your son the money he needs for his education (assume his first year at Harvard is Year 0, and his final year is Year 3)?

please use excel

Homework Answers

Answer #1

This question needs to be solved in 2 parts.

in first part, we need to calculate present value at the start of year 0 of $85,000*4 = $340,000 for 4 years of tuition and living expenses.

in second part using this present value, we need to calculate monthly investments for 15 years to get that present value.

Part 1
Future value $340,000
Interest rate 4.50%
No. of years 4
payments $0
Present value $285,110.86
Part 2
Future value $285,110.86
monthly Interest rate 0.54%
No. of months for investments 180
Present value $0
Monthly investments $939.27

Calculation

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
15 years from now, your 2-year old son will be attending Harvard. You have determined he...
15 years from now, your 2-year old son will be attending Harvard. You have determined he will need $85,000 per year for tuition and living expenses. In 15 years, you will give him a lump sum payment for the entire amount he will need, assuming that he will be able to invest the money not yet needed at 4.5% interest. You have found an investment opportunity that will yield an annual return of 6.5% on your monthly payments. How much...
15 years from now, your 2-year old son will be attending Harvard.  You have determined he will...
15 years from now, your 2-year old son will be attending Harvard.  You have determined he will need $85,000 per year for tuition and living expenses.  In 15 years, you will give him a lump sum payment for the entire amount he will need, assuming that he will be able to invest the money not yet needed at 4.5% interest.  You have found an investment opportunity that will yield an annual return of 6.5% on your monthly payments.  How much will you have to...
15 years from now, your 2-year old son will be attending Harvard. You have determined he...
15 years from now, your 2-year old son will be attending Harvard. You have determined he will need $70,000 per year for tuition and living expenses. In 15 years, you will give him a lump sum payment for the entire amount he will need, assuming that he will be able to invest the money not yet needed at 5% interest. You have found an investment opportunity that will yield an annual return of 7% on your monthly payments. How much...
Your client has a 10-year old son who will be entering college in 8 years. Your...
Your client has a 10-year old son who will be entering college in 8 years. Your client estimates college costs to be $16,000, $17,000, $18,000 and $19,000 payable at the beginning of each of the son’s four years in college. Your client expects to have $4,000 available when he turns 15 to help defray his college expenses. How much must your client save at the end of each year for the next 8 years to have enough savings to pay...
Case Scenario: A mother drops off her 15-year-old son at soccer practice. He plays for a...
Case Scenario: A mother drops off her 15-year-old son at soccer practice. He plays for a traveling team, and she is headed to the grocery store to do some shopping while he is occupied. While at the store, she receives a telephone call from the coach, telling her that her son was kicked just below the knee, causing him to fall to the ground. He was wearing his shin guards but complains that it hurts too much to walk. The...
Michelle wishes to establish a university fund for her son who is currently 8 years old....
Michelle wishes to establish a university fund for her son who is currently 8 years old. Required: a. If her son will need a monthly income of $900, how much does he need to be in place at the start of his university life (ie start of first-year) so that the $900 per month is achievable? Assuming that the interest over the three years while her son is at university is 6%p.a. compounded monthly and he is paid the $900...
Michelle wishes to establish a university fund for her son who is currently 8 years old....
Michelle wishes to establish a university fund for her son who is currently 8 years old. Required: a. If her son will need a monthly income of $900, how much does he need to be in place at the start of his university life (ie start of first-year) so that the $900 per month is achievable? Assuming that the interest over the three years while her son is at university is 6%p.a. compounded monthly and he is paid the $900...
You have your choice of two investment accounts. investment a is a 15-year annuity that features...
You have your choice of two investment accounts. investment a is a 15-year annuity that features end-of-month 1175 payments and has a rate of 6.4 percent compounded monthly. investment b is a lump-sum investment with a 7 percent continuously compounded rate, also good for 15 years. how much money would you need to invest in b today for it to be worth as much as investment a 15 years from now?
3-part question. Five years from now you would like to have $25,000 for a down payment...
3-part question. Five years from now you would like to have $25,000 for a down payment on a home. Assuming you could earn 9% interest, how much money would you need to invest today as a lump sum to meet your goal? How much money would you have to invest at the end of each year to meet your goal? How much would you need if you invested the payments at the beginning of each year with the first payment...
What is the present value of $200 to be received two years from now, with an...
What is the present value of $200 to be received two years from now, with an interest rate of 5%? You deposit $2000 today at 6% interest. How much will you have in 5 years? You invest $5,000 today. You will earn 8% interest. How much will you have in 4 years? You have $450,000 to invest. If you think you can earn 7%, how much could you accumulate in 10 years? You deposit $300 each year for 15 years...