Mariln Heleen Case
Executive Summary
If we take a look at the first case, George and Marilyn Heleen are planning to save to be able to fully support their newborn daughter’s future college expenses. In 18 years from today, they expect college expenses to be $50,000 per year for four years. In order to be able to determine how much they must save each year for 18 years we will have to perform two different calculations. Additionally, we will calculate the amount they have to save each year at three different percentage rates which are 12, 10, and 8 percent.
In order to determine the amount that the Heleen’s must save, we must first discount the $50,000 yearly college payments to their present value at year 18. The present value of the $50,000 annuities are $170,091.56 at 12%, $174,342.60 at 10%, and $178,854.85 at an annual percentage rate of 8%. This present value then becomes the future value that they must have at the end of 18 years of saving. Therefore, at an annual percentage rate of 12%, we determine that the Heleens will have to deposit $2,724.09 every year to able to completely support their daughter’s four years of college. At a 10% rate they must deposit $3,475.79 and at 8% they must deposit $3,362.22 each year.
Lastly we conclude that the difference in payments is due to the varying interest rates. The higher the interest rate the lower the yearly deposits have to be.
Executive Summary
If we take a look at the first case, George and Marilyn Heleen are planning to save to be able to fully support their newborn daughter’s future college expenses. In 18 years from today, they expect college expenses to be $50,000 per year for four years. In order to be able to determine how much they must save each year for 18 years we will have to perform two different calculations. Additionally, we will calculate the amount they have to save each year at three different percentage rates