Ashley is planning to attend college when she graduates from high ...

[dalyningkenk]

Ashley is planning to attend college when she graduates from high school 7 years from now. She anticipates that she will need 10,000 at the beginning of each of the four college years to pay for tuition and fees, and have some spending money.
 
  Ashley has made an arrangement with her father to do the household chores if her dad deposits 3,500 at the end of each year for the next 7 years in a bank account paying 8 percent interest. Will there be enough money in the account for Ashley to pay for her college expenses? Assume the rate of interest stays at 8 percent during the college years.

Question 2

Risk, the magnitude and timing of cash flows are the key determinants of share price, which represent the wealth of owners in a firm.
 
  Indicate whether the statement is true or false

[Cnarkel]

Answer to Question 1

At the beginning of the first year of college:
PV = 10,000 + (10,000/0.08 )  1-1/(1.08 )3
= 10,000 + 25,770.96 = 35,770.96
PMT = 3,500, r= 8, n = 7
FVA = 3,500(1.08 )7-1/0.08 = 3,500(8.923 ) = 31,230
Ashley will need 4,541 (= 35,770.96 - 31,230 ) additional money to pay for her college education.

Answer to Question 2

TRUE

[dalyningkenk]

TY

[Cnarkel]

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