Question

Case Study Planning for UniversityVictor and Jasmine Gonzalez were discussing how to plan for their three young sons’ university education. Stephen turned 12 years old in April, Jack turned 9 in January, and Danny turned 7 in March. Although university was still a long way off for the boys, Victor and Jasmine wanted to ensure enough funds were available for their studies.Victor and Jasmine decided to provide each son with a monthly allowance that would cover tuition and some living expenses. Because they were uncertain about the boys’ finding summer jobs in the future, Victor and Jasmine decided their sons would receive the allowance at the beginning of each month for four years. The parents also assumed that the costs of education would continue to increase.Stephen would receive an allowance of $1000 per month starting September 1 of the year he turns 18.Jack would receive an allowance that is 8% more than Stephen’s allowance. He would also receive it at the beginning of September 1 of the year he turns 18.Danny would receive an allowance that is 10% more than Jack’s at the beginning of September of the year he turns 18.Victor and Jasmine visited their local bank manager to fund the investment that would pay for the boys’ allowances for university. The bank manager suggested an investment paying interest of 4.0% compounded monthly, from now until the three boys had each completed their four years of education. Victor and Jasmine thought this sounded reasonable. So on June 1, a week after talking with the bank manager, they deposited the sum of money necessary to finance their sons’ post-secondary educations.How much allowance will each of the boys receive per month based on their parents’ assumptions of price increases?

Answer 1

Stephen will receive $1000 per month; Jack will receive $1080 per month (8% increase over Stephen's allowance); Danny will receive $1188 per month (10% increase over Jack's allowance), all as part of their university education funding plan.

Step-by-step explanation:

The question asks us to calculate how much allowance each of Victor and Jasmine Gonzalez's three sons will receive per month for their university education, accounting for annual price increases. Stephen, the eldest son, will receive $1000 per month when he turns 18. Jack, their second son, will receive an allowance that is 8% more than Stephen's. Danny, the youngest, will get an allowance that is 10% more than Jack's.

Here are the calculations:

• Stephen's monthly allowance: $1000
• Jack's monthly allowance: $1000 + ($1000 * 0.08) = $1000 + $80 = $1080
• Danny's monthly allowance: $1080 + ($1080 * 0.10) = $1080 + $108 = $1188

Thus, the monthly allowances for the Gonzalez children based on the parents' plan and the assumption of price increases will be:

• Stephen: $1000
• Jack: $1080
• Danny: $1188

Answer 2

The allowance per month for each boy, based on the parents' assumptions of price increases, would be:

• Stephen: $1000
• Jack: $1080
• Danny: $1188.

Step-by-step explanation:

The allowance for Stephen is fixed at $1000 per month. Jack's allowance, being 8% more than Stephen's, would be $1000 * 1.08 = $1080 per month. Danny's allowance, being 10% more than Jack's, would be $1080 * 1.10 = $1188 per month.

This planning involves setting increasing allowances for each son based on a percentage increase relative to the previous one. Stephen starts at $1000 per month, and Jack’s is 8% more, while Danny's is 10% more than Jack's. These increment percentages are calculated based on the previous amount.

So, the monthly allowances considering the assumed increases are:

• Stephen: $1000
• Jack: $1080
• Danny: $1188.