Question

Assume Courtney decides to purchase Intel stock for $100,000. She plans to hold half the shares for 5 years to purchase the Park City home and hold the other half for 8 years to pay for Deron's education. If the Intel stock grows at a constant 8% before-tax rate and does not pay any dividends, how much cash will Courtney accumulate after taxes for Deron's education?

Answer 1

Courtney will accumulate $91,104.64 after taxes for Deron's education.

Step-by-step explanation:

To calculate the cash Courtney will accumulate after taxes for Deron's education, we need to determine the future value of half of the Intel stock after 8 years. Since the stock grows at a constant 8% before-tax rate and does not pay any dividends, we can use the compound interest formula:

Future Value = Present Value * (1 + Growth Rate)^Time

Given that the present value is $50,000 (half of $100,000), the growth rate is 8%, and the time is 8 years, we can calculate the future value:

Future Value = $50,000 * (1 + 0.08)^8 = $91,104.64

Therefore, Courtney will accumulate $91,104.64 after taxes for Deron's education.