Reference no: EM133010690

Your friend Carol has asked you to help her out as she is developing her financial plan. Help her come up with a plan for her finances and how she can set herself up for financial success!

She has an after tax income of $48,000 and budgets $30,000 for necessary expenses. This leaves $18,000 to spend on debt and savings annually. (Assume all annuity payments are in the form of ordinary annuities.)

Question 1: Carol would like to save up for a down payment on a home she hopes to purchase in 5 years. If she wishes to have $20,000 saved up at the end of five years and can earn 3.5% annually in her savings account. If she would like to make equal annual deposits, what amount will her deposits need to be in order to reach her goal?

Question 2: Carol received $20,000 as an inheritance from her uncle. He stipulated that she save this money for her 2 children's college education. She would like to have $50,000 saved up in 10 years. What annual interest must she earn in order to reach this goal (she will make no additional deposits to this account)?