Your client has two children. The younger one just turned 2, and the older one just turned 4. They are expected to go to college when they turn 17. The college expenses are expected to be $25,000 per year for the older child and $30,000 per year for the younger child, for four years, and payable at the beginning of each year. Your client is planning to start a college savings account with an initial deposit of $5,500 today. Then, she can make monthly deposits of $500 with the first deposit in exactly one month, and each consecutive deposit to take place at the end of each month until the first child starts college. The proceeds in the account will be invested in a mix of risky securities with an average expected return of 9% until the first child starts college. Thereafter, the funds will be shifted to a safer account that is expected to generate a mere 6% annually. Your client is planning on taking a well deserved vacation as soon as the first child is off to college. Are there going to be any funds available in the account for that purpose that can be withdrawn (when the oldest child is off to college) without jeopardizing the payouts for the college expenses of the two children? If yes, how much? If no, how much will she be short of her goal?
Your client has two children. The younger one just turned 2, and the older one just turned 4. They are expected to go to college when they turn 17. The college expenses are expected to be $25,000 per year for the older child and $30,000 per year for the younger child, for four years, and payable at the beginning of each year. Your client is planning to start a college savings account with an initial deposit of $5,500 today. Then, she can make monthly deposits of $500 with the first deposit in exactly one month, and each consecutive deposit to take place at the end of each month until the first child starts college. The proceeds in the account will be invested in a mix of risky securities with an average expected return of 9% until the first child starts college. Thereafter, the funds will be shifted to a safer account that is expected to generate a mere 6% annually. Your client is planning on taking a well deserved vacation as soon as the first child is off to college. Are there going to be any funds available in the account for that purpose that can be withdrawn (when the oldest child is off to college) without jeopardizing the payouts for the college expenses of the two children? If yes, how much? If no, how much will she be short of her goal?
Related questions
| You are saving for the college education of your two children. They are two years apart in age; one will begin college 16 years from today and the other will begin 18 years from today. You estimate your childrenâs college expenses to be $36,000 per year per child, payable at the beginning of each school year. The annual interest rate is 6.6 percent. Your deposits begin one year from today. You will make your last deposit when your oldest child enters college. Assume four years of college. |
| How much money must you deposit in an account each year to fund your childrenâs education? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
