1. In three years, Kelly wants to take a year off from work to travel around the

Question

1. In three years, Kelly wants to take a year off from work to travel around the world. She believes it currently would cost $45,000, but it would increase 4% a year. Kelly anticipates she can earn 6% on her investments. Kelly has been able to save $10,000 so far. How much would Kelly need to save at the beginning of each month?

Answers:              

A. $289

B. $306

C. $482

D. $491

2. Bianca is a wealthy widow and a doting grandmother. Bianca would like to do as much as possible to help her 18-year-old granddaughter Esmerelda with college expenses. Esmerelda will be attending a private college this fall and the tuition will be $24,000 per year. Esmerelda expects to graduate in 4 years. Room and board will cost an additional 11,000 per year. Which of the following will allow Bianca to provide the most financial assistance that is free from both gift tax and generation-skipping transfer tax?

Answers:      

A. Contribute $140,000 to a Section 529 plan and elect front-loading.

B. Gift $140,000 of highly appreciated stock directly to Esmerelda this year.

C. Contribute $70,000 to an ESA and elect front-loading.

D. Pay the $24,000 tuition directly to the school and write a check to Esmerelda for $11,000 each year.

Explanation / Answer

1. The answer will be  C. $482

Explanation:

N(Period) = 36 Months (3Years x 12)

I (Interest)= Inflation adjusted rate of return , [1.06/1.04 – 1] x 100) =1.9231

PV = 10,000 (input as a negative number)

FV = 45,000

Solve for PMT the answer will be $482.

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.