[solution]: William's betting rate for a bet on Ohio State winning the game

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Question 1.

Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs \$20,000 per year today. If her parents have saved \$10,000 for this goal. Assume they can invest for 10% per year and inflation is 3.5% per year compounding annually. What?s the PV of Amy?s needs?

 74,888.2 72,676.2 73,184.3 72,476.2

Question 2

• Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs \$20,000 per year today. Her parents have saved \$10,000 for this goal, Assume they can invest for 10% per year and inflation is 3.5% per year compounding annually.

What's the future value of what Amy's parents currently save?

 10,000 14,411.7 14,823.3

Question 3

Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs \$20,000 per year today. If her parents have saved \$10,000 for this goal, how much more do they need to save at the end of each month in order to be able to fully fund her four-year college? Assume they can invest for 10% per year and inflation is 3.5% per year compounding annually.

 410.75 620.75 712.54 674.24

72,676.20

Interest Rate

Inflation rate

Real Rate =

Current Savings

Future value of savings

\$620.75

10%

4%

6.28%

10,000

14411.66

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