Reference no: EM132762121

Izzy Parker is a very bright recent college graduate that has just finished a degree in health sciences. Her plan has always been to become a doctor; however, she has decided to postpone medical school to pursue her ultimate dream of becoming a famous actress. Izzy has decided to give herself 5 years to land a decent role in a movie or television show and if after 5 years she is unsuccessful she made a promise to herself that she would go to medical school. Additionally, as part of this promise, Izzy has made a pledge to herself that she would save enough money such that she could pay for school.

• Izzy estimates that it will cost $49,000 per year for 4 years (payable at the end of each year). Fortunately, her parents are very supportive of her plan and have agreed to provider her some financial assistance. They had been saving for the last 5 years, investing $6,900 per year, and they told Izzy should have this money for school. Current interest rates are 10%.

Problem 1: How much additional money will Izzy need to put aside herself annually for the next 5 years to pay for medical school? How would your answer change if interest rates fell dramatically over this 5 year period, explain your answer.