Bob and Carol are planning for the birth of their first child exactly four year from today. They are now to start saving plan for the big event. The current hospital cost for having a healthy baby at the local hospital is $6500 after all insurance payments. Pre-natal care for the inmediate 12 months period prior to having the baby amounts to $2000 out-of-pocket costs. Carol’s best friend is planning a baby shower, so only a crib baby carrier, and other miscellaneous items will be needed, which all cost $1200 today. However, these items will be purchased and paid for the day of the child’s birth, and the items are expected to increase in costs by 10% each year over the next four years due the inflation.
Bob and Carol now have $500 in cash that they plan to put in the bank in order to cover the all the now costs. Also, uncle Ted has promised to contribute $1000 at the end of the year two, as a present to Bob and Carol for baby expenses.
Currently, Bob and Carol can earn 6% compounded annually on this money. In order to be able to pay cash for all expenses on the day baby born, how much will Bob and Carol have to save, assuming the baby born exactly four years from today.
Questions.
1. Draw the timeline that illustrates the timing of all the events of the situation describe above.
2. How much will Bob and Carol need to have in the bank on the day the baby born in order to achieve all their goals?.
3. What amount needs to be saved at the end of each year in order for Bob and Carol to reach their financial goals?.
Submit your 2 to 4 page paper to the week 3 assignment 2 dropbox by week 3 day 6.
Criteria.
Correctly constructed the timeline of the significant events.
Correctly itemized and total costs and contributions to the baby funds.
Correctly identified the correct total contributions needed to achieve the stated goals.
Properly identified the amount that must be saved each year, in order to reach the stated goals.
Work was clearly, written, with logical flow, with minimal errors (including APA format) and utilized appropriate citation/reference of sources.
