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You deposited $160000 into an education savings plan hoping to have $ 420000 available 12 years later when your first child starts university However you did not invest very well and two years

You deposited $160,000 into an education savings plan, hoping to have $ 420,000 available 12 years later when your first child starts university. However, you did not invest very well, and two years later, the account s balance has dropped to $140,000. You approached a financial advisor and he agreed to work with you to get the investment value back on track. 1). Shocked by your experience of the past two years, you feel the education savings fund has invested too much in shares, and you want low-risk fund in order to ensure you have the necessary $420,000 in 10 years. You are willing to make end-of-the-month deposits to the fund as well. You find you can get a fund that promises to pay a guaranteed annual return of 6% that is compounded monthly. You decide to transfer the $140,000 to this new fund and make the necessary monthly deposits. How large a monthly deposit must you make into the new fund each month to obtain the $420,000 required at the end of 10years? 2). After seeing how large the monthly deposit would be in part (b) above, you decide to invest the $140,000 today and $500 at the end of each month for the next 10 years into a fund comprising 50% shares and 50% bonds and hope for the best. What APR would the fund have to earn in order to reach your $420,000 goal?

 

May 22 2020 View more View Less

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