Q Mark and Sarah are parents planning for their child's education. They estimate that they will need $ in today's dollars to cover the cost of their child's college education in years. They are considering two options for saving for their child's education: investing a lump sum now or saving annually.
Data:
Lump Sum Investment Option:
Mark and Sarah have $ in savings that they can invest today.
They plan to invest the $ in an education savings account expected to earn an average annual return of
Annual Saving Option:
Alternatively, Mark and Sarah can choose to save annually by contributing to an education savings account.
They plan to make annual contributions at the beginning of each year.
They expect to earn the same average annual return of on their investments.
Questions:
If Mark and Sarah choose the lump sum investment option, how much would they have in the education savings account in years?
If Mark and Sarah choose the annual saving option, how much should they contribute each year to reach their education savings goal?
Which option would be more suitable for Mark and Sarah based on their financial situation and preferences?
mar
