Answer Happy

9) The Washingtons need help planning for college finances for their two children, Hillary and Donald. They expect their second child, Hillary, to start college in 18 years. At that time, they would like to have enough money on hand to withdraw $15,000 per quarter to pay tuition at Wellesley College. Because college will last four years, they need to make a total of 16 quarterly withdrawals, with the first one made the day Hillary starts college. They plan on gathering the necessary funds by making quarterly deposits into an account which pays 5% APR, compounded quarterly. However, there is one complication. Donald will start college at a different school in 8 years, University of Pennsylvania. Due to a generous uncle, the Washingtons already have enough money to pay for Donald's education. However, due to the high cost of college living expenses, the Washingtons will be unable to add to Hillary's college fund while Donald is in college. Therefore, they will have to stop making deposits the day that Donald starts college. Thus the Washingtons will be able to make a total of 32 quarterly deposits into Hillary's college fund, with the first deposit at the end of the first quarter and the final deposit occurring the day Donald starts college. What should be the amount of these quarterly deposits? 10) You are considering leasing a car for 60 months. The advertisement says that the monthly payments are $599 with $3,000 down at signing. Your internet research indicates that the market value of the car is $35,000, and that the expected market value in 5 years will be $10,000. What is the effective annual rate (EAR) that you are paying for this lease?