Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

Need help with the following. Can you please show me how to answer the problems at the end of this reading for future value and present value. Problem: Critical Thinking Problem - College Cost Case Study

'Greg and Debra Quilici own a four bedroom home in an affluent neighborhood just north of San Francisco, California. Greg is a partner in the family owned commercial painting business. Debra now stays home with their child, Brady, who is age 5. Until recently, the Quilicis have felt very comfortable with their financial position. After visiting Lawrence Krause, a family financial planner, the couple became concerned that they were spending too much and not putting enough funds aside for both their child's future education needs and their own retirement. Greg earns $85,000 per year, but with the rising costs of education, their past contribution efforts have left them short of their financial goals. To estimate the amount of money the Quilicis need to begin putting away for future security some general information was obtained by their financial planner. The couple felt that the amount of money they currently contribute to their Koegh plan would be sufficient for their retirement needs. What they had not accounted for was Brady's education. Greg is an alumni of Stanford University, a private school with an extremely high tuition of approximately $20,000 per year. Debra graduated from the University of North Carolina at Chapel Hill. The tuition expense there is only $2,500 per year. When Brady turns 18, the couple wishes to send him to either of these exceptional universities. They have a slight preference for the much more local Stanford University. The problem, however, is that with the rate at which tuition is increasing the Quilicis are not sure they can raise enough money. To assist in the calculations, assume the tuition at both universities will increase at an annual rate of 5%. Living expenses are currently estimated at $6,000 per year at both schools. This expense is expected to grow at only 3% per year. Further assume the Quilicis can deposit their money into a growth oriented mutual fund at Neuberger & Berman Management, Inc., which has historically earned a 12% return per annum (1% per month). The couple wishes to have a pre-determined monthly amount automatically drafted from their checking account. When Brady starts college they will slowly liquidate the account by making an annual payment to Brady to cover tuition and living expenses at the beginning of each year for the four years he will be in college.'

I need help answering problems:
1. How much will tuition and living expenses be per year when Brady is ready to attend? Give an answer for each university.
2. Once Brady starts college what will his total expenses be in each of his four years? Again, give an answer for each university.
3. How much money will Greg and Debra have to deposit per month to allow Brady to attend Stanford University? How much money will have to be deposited per month to allow Brady to attend the University of North Carolina? (HINT: To answer this problem you need to consider the costs of ALL four years.)
4. What if the Quilicis feel the Neuberger & Berman mutual fund will only yield 10%. How much will have to be deposited per month in order for Brady to attend each college?
5. What is the relationship between the amount that must be deposited monthly by the parents and and the future increases in both tuition and living expenses?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M924329

Have any Question? 


Related Questions in Basic Finance

Does depreciation affect cash flow in a positive or

Does depreciation affect cash flow in a positive or negative manner? From a net present-value perspective, why is accelerated depreciation preferable? Is it acceptable to utilize one depreciation method for tax purposes ...

Use the normal distribution of fish lengths for which the

Use the normal distribution of fish lengths for which the mean is 11 inches and the standard deviation is 4 inches. Assume the variable x is normally distributed. A. What % of the fish are longer then 12 inches B. If 400 ...

Question 1find the simple interest on a 400 investment made

Question 1 Find the simple interest on a $400 investment made for 5 years at an interest rate of 7%/year. What is the accumulated amount? A. The simple interest is $140, the accumulated amount is $540. B. The simple inte ...

Explain the advantages and disadvantages of implementing

Explain the advantages and disadvantages of implementing portfolio insurance using stock and puts in comparison to using stock and futures in a dynamic hedge strategy ? Explain how a portfolio manager might justify the p ...

Gruber corp pays a constant 740 dividend on its stock the

Gruber Corp. pays a constant $7.40 dividend on its stock. The company will maintain this dividend for the next 8 years and will then cease paying dividends forever. The required return on this stock is 12 percent. What i ...

For each of the following scenarios identify which sampling

For each of the following scenarios, identify which sampling method is used: a. The State College is conducting a survey of student attitudes and opinions. The plan is to use the list of all registered students and rando ...

Explain how a protective put is like purchasing insurance

Explain how a protective put is like purchasing insurance on a stock ? Why is choosing an exercise price on a protective put like deciding which deductible to take on an insurance policy? Discuss and compare the two bull ...

An investor has projected three possible scenarios for a

An investor has projected three possible scenarios for a project as follows: Pessimistic-NOI will be $200,000 the first year, and then decrease 2 percent per year over a five-year holding period. The property will sell f ...

1 describe and contrast the role of rfdc and rfid for

1. Describe and contrast the role of RFDC and RFID for logistics and supply chain applications. 2. Discuss the relative benefits of software purchase, use of third-party providers, and use of application service provider ...

Suppose the lease on a certain space will expire at the

Suppose the lease on a certain space will expire at the beginning of 2010. You believe that the probability of the existing tenant renewing is 75 percent. If they renew, you will need to spend only an estimated $5.00/SF ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

Section onea in an atwood machine suppose two objects of

SECTION ONE (a) In an Atwood Machine, suppose two objects of unequal mass are hung vertically over a frictionless

Part 1you work in hr for a company that operates a factory

Part 1: You work in HR for a company that operates a factory manufacturing fiberglass. There are several hundred empl

Details on advanced accounting paperthis paper is intended

DETAILS ON ADVANCED ACCOUNTING PAPER This paper is intended for students to apply the theoretical knowledge around ac

Create a provider database and related reports and queries

Create a provider database and related reports and queries to capture contact information for potential PC component pro

Describe what you learned about the impact of economic

Describe what you learned about the impact of economic, social, and demographic trends affecting the US labor environmen