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How much will mary be able to spend each year for john

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John is going to establish a University Fund for his daughter Mary, who has just been born. He plans to make the first deposit of $20,000 today and then annual deposits of $5,000 will be made until Mary's 17th birthday. Given the long term nature of the investment, John anticipates a 5% pa return. The money is transferred to an account for Mary on her 17th birthday and she will then withdraw the money in equal annual amounts for 5 years starting on her 18th birthday. Mary will only be able to earn 3% pa on her money.

Problem (i) How much money will be available on Mary's 17th birthday?

Problem (ii) How much will Mary be able to spend each year?

Reference no: EM132979383

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