How much will Karine and Arlo have to contribute each year to achieve their goal?.
Karine and Arlo are trying to establish a University Fund for their daughter Amelia, who turns 3 today. They plan for Amelia to withdraw $10,000 on her 18th birthday and $11,000, $12,000 and $15,000 on her subsequent birthdays (19th, 20th and 21st). They wish to fund these withdrawals with a 10-year annuity, and they intend to make their first deposit one year from today, and expect to earn an average return of 6.5%pa.
- How much will Karine and Arlo have to contribute each year to achieve their goal?
- Create a schedule showing the cash inflows (including interest) and outflows of this fund. How much will be in the fund on Amelia’s 16th birthday?