Prepaid college tuition plans, also known as Prepaid Education Arrangements (PEAs), allow you to prepay college tuition at present-day prices. The value of the investment is guaranteed by th
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Get it written →Q1. Prepaid college tuition plans, also known as Prepaid Education Arrangements (PEAs), allow you to prepay college tuition at present-day prices. The value of the investment is guaranteed by the state to cover college tuition, regardless of its future cost. You are considering the purchase of an education certificate for $25,000, which will cover the future tuition costs of your 8-year old daughter. You expect the tuition cost of your daughters bachelors degree to be $50,000 in 10 years. What would your personal discount rate need to be in order for it to be worthwhile for you to make the investment and purchase the certificate?
Q2. A 30 year old employee hopes to have $200,000 saved in their retirement account 25 years from now by contributing $150 per month in a 401(k) plan. The goal is to earn 10% annually on the monthly contribution. Will they have the $200,000 at the end of the 25 years?
Q3. How many years will it take for $136,000 to grow to $468,000 if it is invested in an account with an annual interest rate of 8%?
Q4. At what interest rate must $112,000 be invested so that it will be worth $392,000 in 14 years?
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