Determine if there inflation

Assignment Help Macroeconomics
Reference no: EM13177676

Some friends of yours have just had a child. Thinking ahead, and realizing the power of compound interest, they are considering investing for their child's college education, which will begin in 18 years. Assume that the cost of a college education today is $150,000; there is no inflation; and there are no taxes on interest income that is used to pay college tuition and expenses.

a.If the interest rate is 5 percent, how much money will your friends need to put into their savings account today to have $150,000 in 18 years?

b.What if the interest rate were 10% percent?

c.The chance that the price of a college education will be the same 18 years from now as it is today seems remote. Assuming that the price will rise 3% per year, and that today's interest rate is 8 percent, what will your friend's investment need to be?

Reference no: EM13177676

Questions Cloud

Which affects karls consumption of beer : derive Karls demand curve for beer as a function of exogenous variables (ie income, prices) hint draw his indifferece curves and budget constraint and think about what must be true at his optimal bundle.
Find the eigenvalues and eigenvectors : Find the eigenvalues and eigenvectors.
Determined total earnings-total deductions and cash paid : Determined total earnings, total deductions, and cash paid , determined each of the employers payroll taxes related to the earnings Ella Dodd for the week endd march 15.
What is the number of chips : The Kraft Co. manufactures computer chips at a variable cost of $4 per chip and sells them for $10 each. If the fixed cost is $12,000 per month, what is the number of chips they would need to produce at the break-even point?
Determine if there inflation : The chance that the price of a college education will be the same 18 years from now as it is today seems remote. Assuming that the price will rise 3% per year, and that today's interest rate is 8 percent, what will your friend's investment need to..
Declaration and payment of the stock dividend : The dividend shares are issued on December 31. Prepare the entries for the declaration and payment of the stock dividend.
What fraction of walleye are longer than in length : Walleye is a common game fish. Adult walleye have a length with a mean of 44 cm and a standard deviation of 4 cm and the distribution of lengths is approximately Normal. What fraction of walleye are longer than 52 cm in length?
What is the standard deviation of the sampling distribution : The lengths of individual fish in a pond have an approximate Normal distribution with a mean of 18.6 cm and a standard deviation of 6.0 cm. A sample of 36 fish is taken. What is the standard deviation of the sampling distribution of the sample mea..
Prepare a trial balance as of december 31 : Prepare a trial balance as of December 31, 2011. There is no need to show your ledger T-accounts; however, preparing and posting to T-accounts may aid in the preparation of the trial balance.

Reviews

Write a Review

Macroeconomics Questions & Answers

  Inflation targeting be a good policy

Why might it be difficult for the Fed to formally adopt inflation targeting?  Would inflation targeting be a good policy for the Fed in the present economic environment

  In using the taylor rule

In using the Taylor Rule as a guideline for monetary policy, what are the pros and cons of using forecasted values of inflation and output rather than observed values of these variables?

  Describe the present economic crisis situation in europe

Describe the present economic crisis situation in Europe.  Why has it been so difficult for the Europeans to find a solution to this problem?   Comment on what implications the crisis may have for the rest of the world if Europeans are not able to ag..

  Long-term federal government budget problems

Question:. Explain why there are long-term Federal government budget problems. Explain why the base-line forecast of the CBO is misleading.

  Derive and compare demand curve

Question based on Derive and compare demand curve,  Derive Ambrose's demand function for peanuts. How does it compare with Johnny's demand curve for peanuts?

  Problem based on utility function

Problem based on  Utility Function - Problem,  Answer and explain the following using a diagram which is completely labeled.

  Laffer curve : tax rate and tax revenue

Question based on Laffer Curve : Tax Rate and Tax Revenue,  Do raising tax rates necessarily raise tax revenue? What factors affect how tax revenue changes when tax rates change?

  Problem - income elasticity of demand

Problem - Income Elasticity of Demand,  Interpret the following Income Elasticities of Demand (YED) values for the following and state if the good is normal or inferior; YED= +0.5 and YED= -2.5

  Positive balance of payment

Question Positive Balance of Payment: "Things will look good for the US if we could just get to where we are consistently running a positive Balance of Payments."

  Effect of recession on the investment curve

Comment on the effect of a recession on the investment curve (only) and on the level of savings, investment, and the equilibrium real interest rate in the financial crisis that hits United States first starting in fall 2007.

  Affect of falling domestic investment on trade surplus and

How will a fall in domestic investment affect the trade surplus and net capital outflows in the domestic economy, the trade deficit and capital inflows in the rest of the world.

  Crises in the banking sector and bank run

Banking crises crisis decreases depositors' confidence in the banking system. What would be the effect of a rumor about a banking crisis on checkable deposits in such a country?

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