### Assuming college savings are invested in account paying

Assignment Help Financial Management
##### Reference no: EM13847217

Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. The couple expects tuition, books and living expenses to cost \$60,000 per year in their child’s first year, and to increase at 4% per year for four years. Assume college payments are made at the end the year (i.e. the freshman payment is made at the end of freshman year, etc.) and that the baby will start college on her 18th birthday.

a) Assuming college savings are invested in an account paying 7% interest, then what is the amount of money she will need to have available at age 18 to pay for all four years of her undergraduate education if the parents don’t want to save any more after her 18th birthday?

b) The couple plans to start saving at the end of the year (i.e. on the child’s first birthday) and to save through the 18th birthday. How much do they need to save every year to have enough money in 18 years to pay for college? (they will not save any more after the 18th birthday)

c) If the couple plans to make one savings deposit every TWO years, starting on the child’s second birthday and ending on her 18th birthday, how much will they need to save every two years?

#### What is the companys pretax cost of debt

The issue makes semiannual payments and has an embedded cost of 7% annually. - What is the company's pretax cost of debt? If the tax rate is 35%, what is the after- tax cost o

#### A zero coupon bond with a face value

A zero coupon bond with a face value of \$1,000 is issued with an initial price of \$475.00. The bond matures in 25 years. What is the implicit interest, in dollars, for the fir

#### Projects competing for the firms fixed capital budget

Galaxy Satellite Co. is attempting to select the best group of independent projects competing for the firm's fixed capital budget of \$10,000,000. Any unused portion of this bu

#### Determining the value of any cash flow is the interest rate

We learned that one of the key variables in determining the value of any cash flow is the interest rate (sometimes referred to as discount rate). However, interest rates may b

#### Manufacturer gaining by the release of the new keyboard

A manufacturer of peripheral devices for PCs decides to try and capture some of the PC gaming market by creating gaming versions of its traditional peripheral devices. What op

#### Financially for company to acquire working capital asset

When does it make sense financially for a company to acquire a working capital asset? For a manufacturer, what makes managing its working capital more time consuming than mana

#### What are the benefits of restructuring

What are the benefits of restructuring and please provide two real life examples. Discuss the objectives of corporate governance and why this has led to increased costs for pu

#### Generally increase the after tax cost of debt

Which of the following will generally increase the after tax cost of debt? a. a firm’s bond rating increases b. the market rate of interest increases c. tax rates decrease d.