Karine and Arlo are trying to establish a University Fund for their daughter Amelia, who turns 3 today. They plan for Amelia to withdraw $11,000 on her 18th birthday and $12,000, $13,000 and $15,000 on her subsequent birthdays (19th, 20th and 21st). They wish to deposit money into an account so that, with interest it will build up enough to make the planned withdrawals. They wish to deposit using a 10-year annuity, and they intend to make their first deposit one year from today, and expect to earn an average return of 6.25%pa. (with explanations in excel)
How much will Karine and Arlo have to contribute each year to the annuity 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?