Suppose that you are planning to pay for your child’s college tuition. Your child was just born, and all-four- years of college tuition for your child will be due exactly on the child’s 18 th birthday (i.e. all payments at end of year 17). You think for the first 8 years you can afford to set aside $4,000 per year (with the first deposit being made at the end of the first year). How much will you have to save in years 9 through 17 so that you have exactly $400,000 saved up for college tuition payments at the end of year 17? Assume that the annual discount rate is 7%.
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