An engineer planning for her son’s college education made deposits into a separate high-risk brokerage account every time she earned extra money from side consulting jobs. The deposits and their timings are as follows:
 FIGURE 1.png)
(a) If the account increased at 15% per year and inflation averaged 3% per year over the entire period, what was the purchasing power of the money in the account in terms of year zero CV dollars immediately after the last deposit in year 17?
(b) Use a spreadsheet to recalculate the purchasing power if the account actually earned 6% per year and inflation was higher than expected at 4% per year. Compare the purchasing power with the total amount deposited over the 17 years.
(a) Find F, then deflate the amount by dividing by (1 + f)?
F = 5000(F/P,15%,17) + 8000(F/P,15%,14) + 9000(F/P,15%,13)
+ 15,000(F/P,15%,10) + 16,000(F/P,15%,6) + 20,000
= 5000(10.7613) + 8000(7.0757) + 9000(6.1528)
+ 15,000(4.0456) + 16,000(2.3131) + 20,000
= $283,481
Purchasing power = 283,481/(1.03)¹? = $171,511
(b) Purchasing power in CV dollars = $61,762, which is less than the total amount
deposited of $73,000
 ANSWER.png)
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