uppose you want to begin a college fund for your newborn child. You hope to accumulate $45,000 by 20 years from now. If a current investment opportunity yields 6%, how much must you invest in a LUMP SUM today to have the $45,000 when needed in 20 years? $14,900 $13,200 $136,200 $14,000 $144,30

uppose you want to begin a college fund for your newborn child. You hope to accumulate $45,000 by 20 years from now. If a current investment opportunity yields 6%, how much must you invest in a LUMP SUM today to have the $45,000 when needed in 20 years? $14,900 $13,200 $136,200 $14,000 $144,30

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter13: Investment Fundamentals

Section: Chapter Questions

Problem 1DTM

See similar textbooks

Related questions

Q: n insurance company is offering a new policy to its customers. Typically, the policy is bought by a…

A: The concept of time value of money will be used here. Since future value has to be computed we will…

Q: Alison is currently 35 years old. On Alison’s 21st birthday she started saving $1500 per year. She…

A: The concept of time value of money will be used and applied here. To compute the future value we…

Q: Demonstrate how the credit risk management issue(s) in the Washington Mutual case can be resolved…

A: Risk Management: A method for identifying potential hazards, assessing those risks, and putting…

Q: (b) An investor invested his wealth into three bonds for 7 years. The following table shows the…

A: The internal rate of return (IRR) is the rate that the investment is anticipated to generate. It is…

Q: Different cash flow. Given the following cash inflow at the end of each year, 15% interest rates at…

A: Future Value refers to the value of the current asset or investment or of cash flows at a specified…

Q: Luisa borrowed to buy a piano, paying $165 at the end of each month for 5 years. The bank charges…

A: Interest rate = 6.34% per annum Since it is monthly compounding the interest rate per month has to…

Q: ABC Mart had 840 forks and spoons in his shop. Last week, 50% of the forks and 75% of the spoons…

A: To calculation of Total amount involved calculating the amount which existed in the priority change…

Q: You are considering two ways of financing a spring break vacation. You could put it on your credit…

A: The effective annual rate (EAR) is the annual interest rate that takes into account the compounding…

Q: Question 21: Studying Bonds Yields Good Returns Suppose there are 3 types of bonds in an economy,…

A: A bond is a debt instrument that facilitates the issuer to raise funds and also obligates him to pay…

Q: Suppose a 9-year bond has a face value of $1,000 and has a semi-annual YTM of 0.085. It pays…

A: For the calculation of the bond's price, we will use the below formula Bond's price =…

Q: Assume Highline Company has just paid an annual dividend of $1.07. Analysts are predicting an 10.5%…

A: As per the dividend discount model the value of a stock today is the present value of all its future…

Q: The effective rate of interest compounded quarterly is given by i(m)/m. What is m? Write your answer…

A: Quarterly compounded effective rate of interest implies that rate of interest is compounded every…

Q: Calculate the missing information for the installment loan that is being paid off early. Number of…

A: Early settlement refers to the completion of a finance package or arrangement before the…

Q: Addison Manufacturing holds a large portfolio of debt securities as an investment. The fair value of…

A: The held to maturity are the security which are held till the maturity date and these can only be…

Q: Taking into consideration all the information given, determine the Net Present Value…

A: NPV It is a capital budgeting tool to decide on whether the capital project is beneficial for the…

Q: Eagle Industries' bonds have a 10-year maturity and a 7.80% coupon paid semiannually. They sell at…

A: A par bond is a bond that is issued at its face value or par value, which is typically $1,000 per…

Q: Kaleb Konstruction, Inc., has the following mutually exclusive projects available. The company has…

A: Payback Period: It represents the period in which the initial investment of a project is recovered.…

Q: Review Warren Buffett’s 2022 letter to shareholders and write a few sentences on anything that…

A: The letter provide the insight which past as a guided in future as a decided in order to take…

Q: James has two job offers. Massy offers James the job with an initial annual salary of $38,800.00…

A: Annual income refers to the amount of money an individual or organization earns within a year,…

Q: Kevin Jones, of Elon, North Carolina, is single and recently graduated from law school. He is…

A: Data given: Salary=$9,100 Federal income tax=$1,700 state income taxes=$520 Medicare and Social…

Q: If the simple CAPM is valid and all portfolios are priced correctly, which of the situations below…

A: Capital Asset Pricing Model: It is a financial model that estimates an investment's or asset's…

Q: Interest-only loan (regular interest payments each year and principal at maturity). Chuck Ponzi has…

A: A loan is a financial arrangement in which one or more people, companies, or other entities lend…

Q: Suppose you want to buy a new house. You currently have R15 000 and you figure you need to have a…

A: Data given: Cash in hand= R 15000 Down payment=10% Closing cost=5% Cost of house=R150000 Rate of…

Q: Nur Inc., is a private company that designs, manufactures, and distributes branded consumer…

A: Relative valuation is a method of valuing an asset or company by comparing it to similar assets or…

Q: The yield to maturity of a $1,000 bond with a 6.6% coupon rate, semiannual coupons, and two years to…

A: The bond price is based on the discounted value of future cash flows coming from the bond. This…

Q: You would like to save up $1184 to travel in 4 years. To do so, you will buy a savings bond that…

A: The concept of time value of money will be used here. Money kept in an investment attracts interest…

Q: What are the different aspects of personal finance? Discuss the each of the aspects.

A: Personal finance refers to the management of an individual's financial resources, including their…

Q: A stock is expected to pay a dividend of $1.50 at the end of the year (i.e., D1 = $1.50), and it…

A: To calculate the stock price in 1 year we will use the below formula Stock price in 1 Year =…

Q: Rabbit Town Corp. Is experiencing rapid growth. Dividends are expected to grow at 30% per year…

A: The concept of dividend discount model will be used here. As per the dividend discount model the…

Q: the interest is nominal is that still good for this answer?

A: Formula used is: (1+Real rate) *(1+Inflation rate)= (1+ Nominal rate)

Q: A Treasury bond that matures in 10 years has a yield of 4.75%. A 10-year corporate bond has a yield…

A: Default risk premium refers to the additional yield or return that investors require for holding a…

Q: ou observed that high-level managers make superior returns on investments in their company’s stock.…

A: The Efficient Market Hypothesis (EMH) is a theory in finance that states that financial markets are…

Q: Lois received a 9 year subsidized student loan of $38,000 at an annual interest rate of 3.125%.…

A: In subsidized student loan, the Federal Govt. pays the interest while the student is in school i.e.,…

Q: Innovation requires a formal investment in R&D. True False

A: Innovation is the introduction of a unique idea that results in the creation of new goods or…

Q: 1) comment on banks’ and insurance companies’ behaviour and identify main drivers of their…

A: Many internal and external factors have an impact on banks and insurance businesses, influencing…

Q: Assume that you bought 100 shares of stock X at $50 per share in your margin account that has an…

A: This question is asking about the concept of margin in a margin account. When you buy stock in a…

Q: A local finance company quotes a 17 percent interest rate on one-year loans. So, if you borrow…

A: A loan is a financial arrangement in which one or more people, companies, or other entities lend…

Q: Colton Corporation's semiannual bonds have a 12-year maturity, an 6.10% nominal coupon paid…

A: The bond is selling at par. Therefore, the nominal yield should be equal to the coupon rate. Nominal…

Q: What is the nominal annual rate of interest compounded semi-annually if deposits of $254 made each…

A: Information Provided: Monthly deposit = $254 Future value = $13,000 Period of deposit = 4 years

Q: You currently have $5,000. First United Bank will pay you an annual interest rate of 8.1, while…

A: The concept of time value of money will be used here. Future value or amount is obtained by…

Q: Which credit risk management model can help to resolve Washington Mutual credit risk issues

A: Washington Mutual, one of the largest banks in the United States, experienced significant credit…

Q: 6. Sharon lives in Saskatoon. She wants to go to the West Edmonton Mall for a shopping trip with her…

A: Financial planning is the process of creating a roadmap to help you achieve your financial goals. It…

Q: Suppose that it is january 15 now. A copper fabricator knows it will require 100,000 pounds of…

A: May futures price is 120 cents per pound spot 125 cents

Q: Determine the cost of Debt of the company

A: Initial cost includes the cost of equipment, installation cost and increase in net working capital.…

Q: Peyton received a 10 year subsidized student loan of $33,000 I didn’t and your interest rate of…

A: Subsidized student loan- In case of subsidized student loan, the federal government pays the…

Q: A credit card bill for $657 was due on April 14. Purchases of $155.56 were made on April 19. The…

A: the average daily balance technique multiplies the credit card amount for each day of a billing…

Q: Factors that influence business risk include except Group of answer choices A)liability…

A: Liability uncertainty is one of the factors that can cause business risk. It refers to the potential…

Q: Ethan secured a 4-year car lease at 6.20% compounded annually that required her to make payments of…

A: Cost of the car is the PV of monthly payments and the down payment. We can determine the PV of…

Q: Discuss the contribution of holbrook working (1895 - 1985) to capital market efficiency

A: Holbrook Working (1895 - 1985) was an American economist who made significant contributions to the…

Q: Jensen Corp. has an expected excess return of 3% for the coming year. The company's beta is 0.8 and…

A: Step 1 A financial model used to determine an asset's expected rate of return is known as the…

Question

Suppose you want to begin a college fund for your newborn child. You hope to accumulate $45,000 by 20 years from now. If a current investment opportunity yields 6%, how much must you invest in a LUMP SUM today to have the $45,000 when needed in 20 years? $14,900 $13,200 $136,200 $14,000 $144,300

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

VIEW

Step 2

VIEW

Step 3

VIEW

Step by step

Solved in 3 steps with 2 images

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Money Management and Achieving Financial Goals

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.

Similar questions

You calculate that you will need $75,000 in ten years to be able to pay for your daughter's college education. If you invest $20,000 today, what rate of return will you need to achieve this goal? Select one: A. Between 12% and 13% B. Between 13% and 14% C. Between 14% and 15% D. Between 15% and 16%
You want to create a college fund for a child who is now 3 years old. The fund should grow to $60,000 in 15 years. If an investment available to you will yield 6 percent per year, how much must you invest in a lump sum now to realize the $60,000 when needed?
You would like to establish a trust fund that would provide annual scholarships of $100,000 today and then grow at 2.0% forever (i.e. at time 1 there will be a $102,000 scholarship award). How much would you have to deposit today in one lump sum to achieve this goal if you can earn a guaranteed 7.0 percent rate of return? 2,140,000 2,355,556 1,945,455 2,650,000
You want to create a college fund for a child who is now 4 years old. The fund should grow to $55,000 in 14 years. If an investment available to you will yield 8 percent per year, how much must you invest in a lump sum now to realize the $55,000 when needed? Round your answer to nearest dollar.
You would like to have $200,000 in a college fund in 15 years. How much do you need today if you expect to earn 12% while you are investing to pay for your child’s college
You currently have $55,000 to invest for your child's college fund. It the total cost of education will be $325,000 and you want to have this amount when your child enters college in 16 years, what rate of return must you earn on your investment? O 12.75 percent O 11.74 percent O 10.55 percent O 13.05 percent O 15.76 percent
man.1 You expect to receive $5,000 at Graduation one year from now. Your plan is to invest this money at 6.5 percent, compounded annually, until you have 50,000. At that time, you plan to travel around the world. How long from now will it be until you can begin your travels?
Assume you are currently 25 years old and just received an inheritance of $1,000,000 from a wealthy relative. You hope to be able to fund your personal retirement account and still have some excess funds to buy your dream car. You want the retirement fund to grow to be $5,000,000 by the time you retire at the early age of 50. If an investment available to you will yield 7% per year, how much must you invest in a lump sum now to realize the $5,000,000 when you retire? Be sure to use the CORRECT table from the Appendix. $921,000 $350,000 O $921,251 $1,000,000
Jane wants to create a fund today that will provide her a 4% guaranteed compounded annual rate. She wants to withdraw $15,000 one year from now and $27,000 two years from now, after which the fund will be depleted. How much must she invest today to achieve this goal? Group of answer choices $42,400.00 $40,775.89 $41,912.43 $39,386.10
Creating a retirement fund Personal Finance Problem To supplement your retirement, you estimate that you need to accumulate $320,000 exactly 39 years from today. You plan to make equal, end-of-year deposits into an account paying 7% annual interest. a. How large must the annual deposits be to create the $320,000 fund by the end of 39 years? b. If you can afford to deposit only $1,300 per year into the account, how much will you have accumulated in 39 years? a. The annual deposits to create the $320,000 fund by the end of 39 years should be $. (Round to the nearest cent.)
Present Value. You want to begin a college fund for your new born child; you hope to accumulate $500,000 within 18 years from now. If a current investment opportunity yields 11 % annually, how much must you invest in a lump sum (or one-time payment) in order to reach the $500,000 when needed?
Now consider your financial objective is to save $500,000 for preparing your retirement, assuming 30 years from now. If you invest your RRSP savings in a mutual fund which can realize an average return of 10% per year. To achieve your goal, how much do you need to save at the end of each year over the 30-year period? a. 4,039.26 b. 3,039.62 c. 2,985.54 d. 10,988.32 What is the FV of $100 deposited today into an account with an APR 12.6%, compounded semiannually for 10 years? a. 1478.96 b. 3460.06 c. 327.63 d. 339.36 A car dealer offers payment of $525.32 per months for 60 months on a $30,000 car after making a $5000 down payment. What's the loan's APR? a. 10.4798% b. 9.5224% c. 1.9609% d. 0.7935%