# solution

Assume that your parents wanted to have \$150,000 saved
for college by your 18th birthday and they started saving on your
first birthday. They saved the same amount each year on your
birthday and earned 9.0% per year on their investments.

a. How much would they have to save each year to reach
their? goal?

b. If they think you will take five years instead of four to
graduate and decide to have \$190,000 saved just in? case, how
much would they have to save each year to reach their
new? goal?

2. When Alfred Nobel? died, he left the majority of
his estate to fund five? prizes, each to be awarded annually
in perpetuity starting one year after he died? (the
sixth? one, in? economics, was added? later).

a. If he wanted the cash award of each of the five prizes to be
?\$57,000 and his estate could earn 8?% per? year, how much
would he need to fund his? prizes?

b. If he wanted the value of each prize to grow by 6?% per
year? (perhaps to keep up with? inflation), how much
would he need to? leave? Assume that the first amount was
still \$57,000.

c. His heirs were surprised by his will and fought it. If they
had been able to keep the amount of money you calculated in (b?),
and had invested it at 8?% per? year, how much would they have
in? 2014, 118 years after his? death?

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