2Your rich aunt wants to help you to pay for your studies and is about to create

Question

2Your rich aunt wants to help you to pay for your studies and is about to create a trust in your name. You anticipate that your education- 3 related expenses will be S 15,000 every year for three years starting from one year from now (i.e., your next tuition is exactly in one year). ) If the fund is going to generate 12% annual return, how much money should you ask your aunt to put into trust now? Trust will be accumulating interest on money remaining in the trust until the last withdrawal three years from now will be made 5 b) Instead of the sum found in part a) your aunt decided to put into trust $ 40,000 today. After she deposited the money, you learn that 8your tuition will be $15,500 every year. Will you have enough money to finance your education? If you have enough, you decide to use 9"extra money" (in excess of what is necessary for education) to go to Hawaii right now. How much money can you spend for Hawaiian 10 trip in order to keep enough money to finance your education? If you don't have enough, you have to ask your uncle to lend you money 11 for three years at 12% effective annual rate. How much do you ask him for? 12 c) If you postpone your trip until your graduation three years from now how much money will you have for the trip or how much you will have to pay back to your uncle? 16 18 Rate 19 20 Time 21 12% PV 23 24 25 1 S (15,000.00) 2 S (15,000.00) 3 S (15,000.00) a) If the fund is going to generate 12% annual return, how much money should you ask your aunt to put into trust now? Trust will be 26 accumulating interest on money remaining in the trust until the last withdrawal three years from now will be made 28 To Put in Trust 29 31

Explanation / Answer

Answer:a)

Answer:b)

Answer:c)Money now=$40000

Money for the trip in 3 years=37231

Remaining balance=2769

Time CF PVF (12% PV ($) 0 1 1 -15000 0.893 -13395 2 -15000 0.797 -11955 3 -15000 0.712 -10680 Total -36030

Related Questions

Navigate

• Browse (All)
• Browse 2
• Subjects

---

---

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