Question

nie Witte Google Chrome https/ nt/PlayerHomework.aspx homeworkld-520805501 questionld 288flushed falseäcld-54079958ecenterwin-yes FIN 3013 Section 002 Spring 2019 (Nguyen) (1) Daniel Witte &a Homework: HW1-Financial Statement Analysis and Time Value Score: 0 of 1 pt 290135 (29 complete) ▼ HW Score: 72.86%, 25.5 of 35 pts P 4-20 (similar to) Question Hep * Assume that your parents wanted to have $140,000 saved for college by your 18th birthday and they started saving on your first birthday They saved the same amount each year on your birthday and earned 6 0% per year on their investments a. How much would they have to save each year to reach their goal? b. If they think you will take five years instead of tour to graduate and decide to have $180,000 saved just in case, how much would they have to save each year to reach heir new goal? a. How much would they have to save each year to reach their goal? To reach the goal of $140,000, the amount they have to save each year ss(Round to the nearest cent ) lac

Need help solving this problem. Please show each step thoroughly. Thank you

Answer 1

a.

Saving Target = $140,000

Interest Rate = 6%

Period = 18 years

Using TVM calculation,

PMT = [PV = 0, FV = 140000, T = 18, R = 6]

PMT = $4,529.92

So, one needs to save $4,529.92 every year to reach goal of $140,000 after 18 years

b.

Period = 18 years + 5 years(for college) = 23 years

Saving target = $180,000

Interest Rate = 6%

PMT = [PV = 0, FV = 180000, T = 23, R = 6]

PMT = $3,830.13

So, one needs to save $3,830.13 every year to reach goal of $180,000 after 23 years