Your parents have accumulated a $120,000 nest egg. They have been planning to use this money to pay college costs to be incurred
by you and your sister, Courtney. However, Courtney has decided to forgo college and start a nail salon. Your parents are giving Courtney $33,000 to help her get started, and they have decided to take year-end vacations costing $10,000 per year for the next four years. Use 7 percent as the appropriate interest rate throughout this problem.a. How much money will your parents have at the end of four years to help you with graduate school, which you will start then? b. You plan to work on a master’s and perhaps a PhD. If graduate school costs $24,060 per year, approximately how long will you be able to stay in school based on these funds?
1 answer:
Answer:
At the end of the 4th year, the original $87,000 less an annual vacation expense of $10,000 would have compounded at an interest rate of 7% to become $69,640
Graduate school costs $24,060. The funds will expire after 2.9 years
Explanation:
Kindly refer to the attached document for clearer breakdown of the workings
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