Decided to use the money for college education

Assignment Help Financial Management
Reference no: EM131015992

Adam Marcs, who graduated from high school last year and could not go to college for lack of funds, has just inherited $60,000 dollars from a distant relative. He decided to use the money for college education. He found that the college he likes the most would cost $32,000 per year for four years. He decided to postpone college, invest his inheritance and work for three years and then use the inherited money and his savings to finance his college education. If we assume that Adam can earn 6% per year on his investments and savings, how much should Adam save every year (starting at the end of the current year) to meet all his college expenses assuming that the $32,000 per year in college cost is paid upfront each year starting at the end of year three? Please show work

Reference no: EM131015992

Questions Cloud

What are these payments worth to you right now : Your parents promise to give you $83 a month for 4 years, starting at the end of this month, to help you out. At a 8.15 percent APR discount rate, what are these payments worth to you right now?
Maximization different from stock price maximization : How is profit maximization different from stock price maximization? Under what conditions might profit maximization not lead to stock price maximization?
Using horizontal analysis-comparative reports : In using horizontal analysis, comparative reports are:
Debt service reserve fund maintained : Huntley Hospital must maintain $3.3 million in a debt service reserve fund maintained by the board of trustees. The board members would like to count this balance when determining the amount of cash that they should carry for meeting normal transacti..
Decided to use the money for college education : Adam Marcs, who graduated from high school last year and could not go to college for lack of funds, has just inherited $60,000 dollars from a distant relative. If we assume that Adam can earn 6% per year on his investments and savings, how much shoul..
Use for debt when calculating the cost of capital : Bennington Industrial Machines issued 149,000 zero coupon bonds six years ago. The bonds originally had 30 years to maturity with a yield to maturity of 7.4 percent. Interest rates have recently increased, and the bonds now have a yield to maturity o..
Adjusting returns for exchange rates : Adjusting returns for exchange rates (LO21-2) An investor in the United States bought a one-year Brazilian security valued at 195,000 Brazilian reals. The U.S. dollar equivalent was 100,000. Determine the total ending value of the Brazilian investmen..
Hedging exchange rate risk : Hedging exchange rate risk (LO21-3) You are the vice president of finance for Exploratory Resources, headquartered in Houston, Texas. In January 2010, your firm’s Canadian subsidiary obtained a six-month loan of 150,000 Canadian dollars from a bank i..
What is the exchange rate and cross rate : Cross rates (LO21-2) Suppose a Polish zloty is selling for $0.3414 and a British pound is selling for 1.4973. What is the exchange rate (cross rate) of the Polish zloty to the British pound? That is, how many Polish zlotys are equal to a British poun..

Reviews

Write a Review

Financial Management Questions & Answers

  Firms current management is called a management buyout

A buyout involving the target firm’s current management is called a management buyout. In what way do these type of deal represent agency conflicts between managers and shareholders? What board procedures can be put in place to mitigate such conflict..

  Reflecting a risk-free rate

Create SML graph reflecting a risk-free rate of 2% and the market return 7%. Company A with a beta of 0.82 and Company B with a beta of 0.88 needed to be labeled on the graph. Then write down the risk premiums of your companies and assess how risky y..

  Explain the likely interest rate conditions

Explain the likely interest rate conditions that would cause these premiums. Does this ensure that covered interest arbitrage is worthwhile?

  Three economic states-their likelihoods and potential return

Compute the expected return given these three economic states, their likelihoods, and the potential returns:

  Bond-yield-plus-judgmental-risk-premium approach

The earnings, dividends, and common stock price of Shelby Inc. are expected to grow at 5% per year in the future. Shelby's common stock sells for $22.00 per share, its last dividend was $2.40, and the company will pay a dividend of $2.52 at the end o..

  Benchmark the performance of his small-cap stocks

A friend announces a plan to benchmark the performance of his small-cap stocks with the S&P 500. Which of the following concerns should dominate your thoughts?

  What is price of bond immediately after makes first paymet

Suppose that General Motors issued a bond with 10 years until maturity, a face value of $1,000, and a coupon rate of 7% (annual payments). The yield to maturity on this bond when it was issued was 6%. Assuming the yield to maturity remains constant, ..

  WACC and Optimal Capital Structure

F. Pierce Products Inc. is considering changing its capital structure. F. Pierce currently has no debt and no preferred stock, but it would like to add some debt to take advantage of low interest rates and the tax shield. Based on this information wh..

  Intrinsic value of deployment specialists stock

Deployment Specialists pays a current (annual) dividend of $1 and is expected to grow at 20% for two years and then at 3% thereafter. If the required return for Deployment Specialists is 10.0%, what is the intrinsic value of Deployment Specialists st..

  What must the coupon rate be on the bonds

Page Enterprises has bonds on the market making annual payments, with eleven years to maturity, and selling for $982. At this price, the bonds yield 7.60 percent. What must the coupon rate be on the bonds?

  Portfolio manager of the delaware fund

Assume that you are the portfolio manager of the Delaware Fund, a $4 million mutual fund that contains the following stocks: Stock Amount Beta A $ 400,000 1.50 B $ 600,000 0.50 C $1,000,000 1.25 D $2,000,000 0.75. The required rate of return in the m..

  Cash accounting measures the deficit

Suppose that the Consumer Price Index fell by 4% between this year and last year while the price of a typical automobile fell by 3%. Cash accounting is easier to implement in practice than is capital accounting. Cash accounting measures the deficit a..

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