Investment

[Guest]

investment


You and your spouse have just welcomed your first child. you realize you need to start saving for his education . you decide that you will begin investing 100/month into as RESP until his 18th birthday. use your calculators tvm solver answer


A) Assuming you can earn an average 7% on your investment (compounded monthly) how will the RESP be worth on the 18th birthday?

Future Balance
$43,679

b) With an RESP investment the government contribute 20% of what you invest directly into your RESP fund. if this 20% is added to your monthly investment how much is really invested every month?


c) Use this new monthly amount to determine the value of the RESP on your son's 18th birthday how much more was earned with the governments 20% contribution?.


d) You decide to start a second resp when your daughter is born and again invest 100/month up to her 18th birthday it is expected that you will be able to earn an average of 7,4% compounded monthly on this investment.calculate the total amount of this RESP using just you monthly investment and compare this to the amount it would be if you consider the 20% government contribution.

please help
thanks

[Raime]

This is a lovely exercise.

[MarcAngely]

Hey there! Thank you for this useful exercise

[Guest]

a) Future Value of RESP at 18th Birthday (7% Interest)
Assuming you invest $100 per month at an average annual return of 7%, compounded monthly, the future value (FV) of the RESP on the 18th birthday can be calculated using the TVM (Time Value of Money) formula:
FV=P((1+r)^n-1/r)
Where:
• P=100 (monthly investment)
• r=7.4%/12=0.0058333 (monthly interest rate)
• n=18×12=216 (total number of monthly contributions)
Using these values, the RESP will be worth approximately $43,679 on the 18th birthday.
b) Monthly Investment with Government Contribution
The government contributes 20% of your investment, so:
Government Contribution=0.20×100=20
Therefore, the total monthly investment is:
Total Monthly Investment=100+20=120
c) Future Value with Government Contribution
With the new monthly investment of $120, the future value of the RESP can be recalculated using the same TVM formula:
P=120
r=0.0058333
n=216
Calculating the future value with these parameters, the RESP will be worth approximately $52,415 on the 18th birthday.
The additional amount earned with the government contribution is:
52,415−43,679=8,736
d) RESP for Second Child at 7.4% Interest
For your daughter's RESP, with an interest rate of 7.4% compounded monthly:
P=100
r=7.4%/12=0.0061667
n=216
Calculating the future value without the government contribution:
FV=P((1+r)^n-1/r)
FV≈46,905
With the government contribution, the new monthly investment is $120, and using the new interest rate:
P=120
r=0.0061667
Calculating the future value with the government contribution:
FV≈56,286FV
The difference due to the government contribution is:
56,286−46,905=9,381
Summary
a) RESP value at 18th birthday (7% interest): $43,679
b) Total monthly investment with government contribution: $120
c) RESP value with government contribution (7% interest): $52,415
• Additional amount earned: $8,736
d) RESP value for second child (7.4% interest):
• Without government contribution: $46,905
• With government contribution: $56,286
• Additional amount earned: $9,381

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[Guest]

investment


You and your spouse have just welcomed your first child. you realize you need to start saving for his education . you decide that you will begin investing 100/month into as RESP until his 18th birthday. use your calculators tvm solver answer


A) Assuming you can earn an average 7% on your investment (compounded monthly) how will the RESP be worth on the 18th birthday?

Future Balance
$43,679

b) With an RESP investment the government contribute 20% of what you invest directly into your RESP fund. if this 20% is added to your monthly investment how much is really invested every month?


c) Use this new monthly amount to determine the value of the RESP on your son's 18th birthday how much more was earned with the governments 20% contribution?.


d) You decide to start a second resp when your daughter is born and again invest 100/month up to her 18th birthday it is expected that you will be able to earn an average of 7,4% compounded monthly on this investment.calculate the total amount of this RESP using just you monthly investment and compare this to the amount it would be if you consider the 20% government contribution.

please help
thanks

Calculate the future value without the government contribution and then repeat with a 20% increase to $120 per month. Is it right?

[Guest]

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