Question

Management at the company you work for is offering to pay for you to complete your...

Management at the company you work for is offering to pay for you to complete your Executive MBA from OSU which will take $10,000 per year for 4 years starting immediately after your MS graduation in May 2020. Management will set aside a sum of money now in their Education Fund paying 7% interest that will be enough to provide the four payments of $10,000 each. While the education money has been deposited today by the management, you will need to withdraw the first $10,000 one year from today.

1) How large must the deposit be in the Education Fund?
2) How much will be in the Education Fund immediately after you receive the first payment?
3) How much will be remaining after the last payment made to you?

Homework Answers

Answer #1

1) Deposit in education fund can be found using formula of PVIFA(Annuity)

PVIFA(annuity) = Annuity[1-(1/(1+r)^n / r ]

r = rate of interest = 7%,

n = no. of year = 4

=10000[1-(1/(1+7%)^4/ 7%]

=10,000[1-(1/(1+0.7)^4 / 0.07]

=10000[1-(1/1.07)^4 / 0.07]

=10000[1-0.7629 / 0.07]

=10000[0.2371/0.07]

=10000[3.387211]

=33872.11$

Thus Deposit in education fund = 33872.11 $

Statement showing balance of fund at end of each year

Year Opening balance Interest @ 7% Withrawal Closing balance
A B = A x 7% C D = A + B - C
1 33872.11 2371.05 10000.00 26243.16
2 26243.16 1837.02 10000.00 18080.18
3 18080.18 1265.61 10000.00 9346.79
5 9345.79 654.21 10000.00 0

2) After receiving first payment , there will be  26243.16 $ in the education fund

3) After last balance , Amount left in education fund = 0$

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
To complete your last year in business school and then go through law school, you will...
To complete your last year in business school and then go through law school, you will need $30,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $30,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 3.73% interest a sum of money that is sufficient to provide the 4 payments of $30,000 each. His deposit will be made today. How...
To complete your last year in business school and then go through law school, you will...
To complete your last year in business school and then go through law school, you will need $20,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $20,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 6.54% interest a sum of money that is sufficient to provide the 4 payments of $20,000 each. His deposit will be made today. How...
Required Lump-Sum Payment To complete your last year in business school and then go through law...
Required Lump-Sum Payment To complete your last year in business school and then go through law school, you will need $20,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $20,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 4.61% interest a sum of money that is sufficient to provide the 4 payments of $20,000 each. His deposit will be...
Required Lump-Sum Payment To complete your last year in business school and then go through law...
Required Lump-Sum Payment To complete your last year in business school and then go through law school, you will need $30,000 per year for 4 years, starting next year (that is, you will need to withdraw the first $30,000 one year from today). Your uncle offers to put you through school, and he will deposit in a bank paying 3.51% interest a sum of money that is sufficient to provide the 4 payments of $30,000 each. His deposit will be...
You deposit $3,000 in a fund at the end of each year for 12 years. The...
You deposit $3,000 in a fund at the end of each year for 12 years. The fund pays 5% compounded annually. How much money is available to withdraw immediately after your last deposit?
A friend asks to borrow $49 from you and in return will pay you $52 in...
A friend asks to borrow $49 from you and in return will pay you $52 in one year. If your bank is offering a. 6.1% interest rate on deposits and​ loans: a. How much would you have in one year if you deposited the $49 ​instead? b. How much money could you borrow today if you pay the bank $52 in one​ year? c. Should you loan the money to your friend or deposit it in the​ bank? a. How...
After graduation, you plan to work for Rocket Corporation for 13 years and then start your...
After graduation, you plan to work for Rocket Corporation for 13 years and then start your own business. You expect to save and deposit $7,000 a year for the first 6 years (t = 1 through t = 6) and $12,500 annually for the following 7 years (t = 7 through t = 13). The first deposit will be made a year from today. In addition, your mother just gave you a $20,00 graduation gift as an incentive to work...
15. Your grandmother just died and left you $40,000 in a trust fund that pays 6.5%...
15. Your grandmother just died and left you $40,000 in a trust fund that pays 6.5% interest. You must spend the money on your college education, and you must withdraw the money in 4 equal installments, beginning immediately. How much could you withdraw today and at the beginning of each of the next 3 years and end up with zero in the account?
a friend asks to borrow $51 from you and in return will pay you $54 in...
a friend asks to borrow $51 from you and in return will pay you $54 in one year. If your bank is offering a 6.4% interest rate on deposits and​ loans: a. How much would you have in one year if you deposited the $51 ​instead? b. How much money could you borrow today if you pay the bank $54 in one​ year? c. Should you loan the money to your friend or deposit it in the​ bank?
A friend asks to borrow $49 from you and in return will pay you $52 in...
A friend asks to borrow $49 from you and in return will pay you $52 in one year. If your bank is offering a 6.5% interest rate on deposits and loans: A. How much would you have in one year if you deposited the $49 instead? B. How much money could you borrow today if you pay the bank $52 in one year? C. Should you loan the money to your friend or deposit it in the bank?