Question

. 2 3. Suppose that you are planning to send your daughter to college in 18 years. Furthermore, assume that you have determined that you will need $100,000 at that time in order to pay for tuition, room and board, party supplies, etc. If you believe that you can earn an average annual rate of return of 8% per year, how much money would you need to invest today as a lump sum to achieve your goal? 4 18 years later FV=PV (1+I)". FV = $100.000 100.000 = PV(1+.08) 4. You don't have the lump-sum amount required for your daughter's college fund, but you know you can save some money every year. How much money would you need to save and invest at the end of each year to achieve your goal?

ignore the handwriting can somebody solve these two

Answer 1

Amount required today is equal to the present value of funds required in the future

= 100,000*PVF(8%, 18 years)

= 100,000*0.2502

= $25,020

4.Future value of annuity = Annual amount*[{(1+r)^n - 1}/r]

Let amount saved each year be x

100,000 = x*[{(1.08)^18 - 1}/0.08]

100,000 = 37.45024x

x = $2,670.21

Hence, ramount required to be saved each year = $2,670.21