Tyler\'s friend, Dain, wants to go to business school. while his father will sha
ID: 2812242 • Letter: T
Question
Tyler's friend, Dain, wants to go to business school. while his father will share some of the expenses, Dain stil needs on his own. But Dain has no money saved for it yet. According to his calculations, it will cost him $25,136 to complete the business program, including tuition, cost of living, and other expenses. He has decided to deposit $4,200 at the end of every year in a mutual fund, from which he expects to earn a fixed 9% rate of return, t will take approximately years for Dain to save enough money to go to business school. Flash Payr MAC 31,0,0108 Q3 2.34. 1 2004-2016 Aplia. All nghts reserved D 2013 Cengage Learning except as noted. All rights reserved Grade It Now Save & Continue Continue without savingExplanation / Answer
Annual Deposits = $ 4200, Rate of Return = 9 % and Target Future Value = Business School Expenses = $ 25136
As deposits are made at the end of every year it can be reasonably assumed that the first deposit comes in one year from now at the end of Year 1 (assuming that this is the beginning of Year 1).
Let the time required to save the requisite B School Expense be T years.
Therefore, 4200 x (1.09)^(T-1) + 4200 x (1.09)^(T-2) + ..........+ 4200 = 25136
{[(1.09)^(T) - 1] / [1.09 - 1]} x 4200 = 25136
(1.09)^(T) = [25136 x 0.09 / 4200] + 1
T = 5.000035 ~ 5 years approximately.
NOTE: If the deposits are assumed to be made beginning immediately, then the equation will be:
{[(1.09)^(T) - 1]/[1.09 - 1]} x 1.09 x 4200 = 25136
T = 4.66 years ~ 5 years
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