Expected average percentage return on savings

Assignment Help Financial Management
Reference no: EM13810268

A couple has just given birth to a baby and named him Jimmy. They want to setup a college savings account for Jimmy and start saving for his college education. The following facts will help you work this problem:

Current Cost of Tution, Room & Board                                            $25,000

Expected Average Inflation                                                                     5%

Expected Average Percentage Return on Savings                               4%

Years until you need the first tution payment                                         18

You will make 18 yearly payments with the first one starting a year from now.

How much will you need at the end of 18 years to fund Jimmy's college education for 4 years? Round your answer to a whole number (Example 150450.61 rounded to 150451 with no commas or dollar signs).

How much will you need to save each year in Jimmy's account to reach your goal of having enough money to fund his college education at the end of 18 years? Round your answer to a whole number (Example 1450.61 rounded to 1451 with no commas or dollar signs)

Reference no: EM13810268

Questions Cloud

What is the companys unlevered cost of equity capital : Skillet Industries has a debt–equity ratio of 1.5. Its WACC is 9 percent, and its cost of debt is 5.5 percent. The corporate tax rate is 35percent. What is the company’s cost of equity capital? What is the company’s unlevered cost of equity capital?
What is the future value of this prize if each payment : The Florida lottery Agrees to pay the winner $254,000 at the end of the year for the next 20 years. What is the future value of this prize if each payment is put in an account earning 0.08?
What is the common-size statement value of inventory : A firm has sales of $1,070, net income of $211, net fixed assets of $514, and current assets of $270. The firm has $86 in inventory. What is the common-size statement value of inventory?
What is the change in net working capital : At the beginning of the year, a firm has current assets of $330 and current liabilities of $234. At the end of the year, the current assets are $497 and the current liabilities are $274. What is the change in net working capital?
Expected average percentage return on savings : A couple has just given birth to a baby and named him Jimmy. They want to setup a college savings account for Jimmy and start saving for his college education. How much will you need at the end of 18 years to fund Jimmy's college education for 4 year..
Correlation coefficient between returns of the two stocks : The covariance of the returns between Willow Stock and Sky Diamond Stock is 0.0990. The variance is 0.2540, and the variance of Sky Diamond is 0.1370. What is the correlation coefficient between the returns of the two stocks?
Negatively impacts their long term capital budgeting. : A frequent criticism of the management of publicly-owned American companies is that they are too short-term oriented, too focused on fast returns, and that this negatively impacts their long term capital budgeting.
Calculate the value of fraziers stock : Frazier Manufacturing paid a dividend last year of $2, which is expected to grow at a constant rate of 5%. Frazier has a beta of 1.3. If the market is returning 11% and the risk-free rate is 4%, calculate the value of Frazier's stock.
Explain how the mortgage secondary market : Explain how the Mortgage Secondary Market (Securitization) Works. Make sure to include the major plays and size of the secondary market, the pros and cons, Mortgage characteristics, and 3 types of Mortgage Backed Securities. Should we continue to hav..

Reviews

Write a Review

Financial Management Questions & Answers

  What will these bonds sell for at issuance

Pangaea Corporation needs to raise funds to finance a plant expansion, and it has decided to issue 30-year zero coupon bonds to raise the money. The required return on the bonds will be 6 percent. a. What will these bonds sell for at issuance?

  What is the price range of houses they should consider

The Johnsons have accumulated a nest egg of $15,000 that they intend to use as a down payment toward the purchase of a new house. Because their present gross income has placed them in a relatively high tax bracket, they have decided to invest a minim..

  Explain the alternative risk management approaches

Explain the alternative risk management approaches and their advantages and disadvantages for a medium-sized gold producer such as Mesa. State which approach you think is appropriate for Mesa and why.

  As explained in the description of the assignment please

as explained in the description of the assignment please use the data provided in exhibit 2 and 3 of the textbook as

  What is the cost of the preferred stock

LL Incorporated's currently outstanding 8% coupon bonds have a yield to maturity of 12%. LL believes it could issue new bonds at par that would provide a similar yield to maturity. If its marginal tax rate is 30%, what is LL's after-tax cost of debt?..

  Calculations if investors were ahead after advance or not

From October 2007 to March 2009, the market declined about 57%. It then advanced in 1 year about 69%. Determine by calculations if investors were ahead after the advance or not?

  Draw policy conclusions from the barings case

Have global financial markets become safer or riskier thanks to the presence of derivative instruments? Elaborate your argument using financial and economic analysis

  Explain the wolf company is examining two capital-budgeting

The Wolf company is examining two capital-budgeting projects with 5-year lives. The first, project A, is a replacement project; the second, project B, is a project unrelated to current operations.

  What is the nominal yield to call

You have the following bond: $10,000 par value, Coupon of 8.5%, semi-annual compounding, Maturity of 13 years, MKT Rate of Interest of 11.65%. Bond is callable in 6 years with a Call Premium of $500. What is the Nominal Yield to Call?

  What is the value of brushy mountains stock

Brushy Mountain Mining Company's coal reserves are being depleted, so its sales are falling. Also, environmental costs increase each year, so its costs are rising. As a result, the company's earnings and dividends are declining at the constant rate o..

  Barbara is considering investing in a stock and is aware

Barbara is considering investing in a stock and is aware that the return on that investment is particularly sensitive to how the economy is performing.

  Security market line sml reward-to-risk

Stock Y has a beta of .9 and an expected return of 11.2 percent. Stock Z has a beta of 0.5 and an expected return of 7.2 percent. If the risk-free rate is 5.0 percent and the market risk premium is 6.0 percent, the reward-to-risk ratios for stocks Y ..

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