What is the monthly contribution

Assignment Help Finance Basics
Reference no: EM133071595

Question 1

(a) Luke and Monica are proud parents of baby Lily who is 2 years old. They want to send Lily to Presbyterian Ladies" College (PLC), a prestigious private girl school, when Lily enters secondary college. They estimate that to fully ?md the cost of Lily's secondary education they will need to have $120,000 at the time Lily is 13 years old. They currently have $10,000 in an education fund for Lily which will be invested at 8% per annum until she reaches 13. They also intend to make monthly contributions into an investment account that pays 12% per annum (i.e 1% per month) with annual compounding. What is the monthly contribution if they were to achieve their saving objective of $120,000 when Lily is 13 years old?

(b) James Holloway has just won a television game show. There are two ways in which James can receive his price: Option 1: a once-off payment of $65,000 in 12 months Option 2: a payment of $5000 a month for 12 months with the payment increasing by 0.5% every month. Assuming that the monthly discount rate is 1.5% and that interest rate compounds monthly, which option is ?nancially better for James?

Reference no: EM133071595

Questions Cloud

Capital budgeting problems : What are some of the difficulties that might come up in actual applications of the various criteria we discussed in this chapter? Which one would be the easiest
What is the monthly interest rate on this loan : He will make payments of $400,000 every month for 3 years at the end of the month to pay off the loan completely. What is the monthly interest rate on this loan
Compute the annual deposit : You plan to retire in the next 30 years. At retirement, your goal is to spend ?ve years travelling around the world.
Monetary solutions for the present day crisis 2007- 2008 : What are some monetary solutions for the present day crisis 2007- 2008?
What is the monthly contribution : (a) Luke and Monica are proud parents of baby Lily who is 2 years old. They want to send Lily to Presbyterian Ladies" College (PLC), a prestigious private girl
Which method was used for valuing inventory : Winsam's most recent balance sheet showed ending inventory of £800. Which method was used for valuing inventory
Average pe ratio for consumer discretionary sector : The table below lists P/E Ratios for some ASX-listed retailers and the average P/E Ratio for the Consumer Discretionary Sector. From this information, what can
What is zoe holding period return : What is Zoe's holding period return after selling the bond today? (Final answer in % and 2 decimal places)
Code of conduct : Review the four articles from the Ethics Toolkit (see reading assignments above) information about writing a Code of Conduct.

Reviews

Write a Review

Finance Basics Questions & Answers

  In view of jennifers long-term investment goals do you

jennifer ponders mutual fundsjennifer hollins is the director of a major charitable organization in lexington kentucky.

  A motivator of employee performance

Most companies spend half or more of their operating budgets on employee wages & benefits. With an investment as high as this, it is important that organization leverage the greatest possible return.

  Why do you think the host country tends to resist

Why do you think the host country tends to resist cross-border acquisitions rather than greenfield investments?

  Compute the net proceeds

Northern Airlines is about to go public. It currently has after-tax receiving’s of $6,000,000 and 4,000,000 shares are owned by the present stockholders.

  Taxes and the cost of borrowing

A new debt issue bearing a 12% coupon and maturing in one lump sum at the end of 10 years involves issuance expenses equal to 2% of the gross proceeds.

  How to compute risk budget

How to compute risk budget? The lower of volatility tolerance and return needs

  Adjust the floatation costs - cost of capital

Cost of Capital - various approaches that can be used to adjust the floatation costs and What are two approaches that can be used to adjust for flotation costs?

  New fx operating exposure after operational hedging

Norse Inc. a U.S. based exporter that exclusively sells its products in Great Britain. Norse, expects to sell 2,000 units at a price of GBP 10.00 per unit

  Find the probability that the machine will be profitable

Find the probability that the machine will be profitable (that is its NPV > 0). Should the hospital buy the machine?

  Options in the black-scholes-merton model

When valuing European Vanilla Options in the Black-Scholes-Merton Model, there is one source of uncertainty. What is this uncertainty?

  How much money must he contribute to his retirement fund

Complex annuity and future value) Milhouse, 22, is about to begin his career as a rocket scientist for a NASA contractor. Being a rocket scientist.

  What is the fair value-xyz inc

After that, growth will increase to 8% per year forever. If owners need to earn 14%, what is the fair value?

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd