Determining the value of the ira

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1. Hector's parents anticipate needing $80,000 when he is 18 for his college education.

a. If he is 5 years old now, how much should they invest in an investment plan that pays 6.23% compounded quarterly?

b. Hector ended up getting a full scholarship. His parents agreed to let him draw the interest off the investment account each quarter (3 months) for expenses. How much will Hector receive each quarter?

2. Meagan invests $1,200 each year in an IRA for 12 years in an account that earned 5% compounded annually. At the end of 12 years, she stopped making payments to the account, but continued to invest her accumulated amount at 5% compounded annually for the next 11 years.

a. What was the value of the IRA at the end of 12 years?

b. What was the value of the investment at the end of the next 11 years?

Reference no: EM132689295

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