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 18^th birthday and $12,000, $13,000 and $15,000 on her subsequent birthdays (19^th, 20^th and 21^st).
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.
i. How much will Karine and Arlo have to contribute each year to the annuity to achieve their goal?
ii. Create a schedule showing the cash inflows (including interest) and outflows of this fund. How much will be in the fund on Amelia's 16^th birthday?