Question

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%.

Answer #1

Answer

You would like to set aside money for your child’s education at
a 4-year college. Tuition payments will begin in exactly 18 years
and will be paid for 4 consecutive years at the child’s 18th, 19th,
20th, and 21st birthdays. It is estimated that the full cost of the
child’s education will be $60,000 per year. Assume interest rate to
be 5%.
- What is the amount needed to meet this cost exactly at 18
years?
- What is the...

You are saving for your child’s college education. Tuition will
be $30,000 each year for four years, with the first tuition payment
due 18 years from today. • How much do you need to deposit today in
a bank account that earns 6% annual interest from now through the
end of your child’s college education so that you will have enough
money to meet all the tuition payments?

Your child is currently 2 years old. You plan to save for your
child’s college education expenses by depositing 5% of your annual
salary into an account that pays 6% interest compounded annually.
If your salary is $100,000 next year when you make the first
deposit, and you expect your salary to grow at 4% a year after
that. How much do you have saved in 16 years when your child goes
to college?

Suppose that some parents begin saving for their child’s college
education. They currently
have 15 years until their child starts college. Current tuition,
room, and board costs $10000
per year. Assume these costs will grow at 7% per year for the next
20 years. Also assume it
will take four years to graduate.
(a) Calculate the costs for tuition, room, and board for these
parents’ child 16, 17, 18, and
19 years from now.
(b) How much would these parents...

A couple plans to pay their child’s college tuition for 4 years
starting 18 years from now. The current annual cost of college is
C$7,000, and they expect this cost to rise at an annual rate of 5
percent. In their planning, they assume that they can earn 6
percent annually. How much must they put aside each year, starting
next year, if they plan to make 17 equal payments?

Your new born child will be starting college in 18 years. You
expect your child's college education to cost $19,270 per year, due
at the beginning of each year. How much must you set aside at the
end of each year for your child to attend four years of college.
You will not make any more deposit after the child turns 18. Assume
an interest rate of 9.06%.

Your client, Brooke, decides to start saving for her son's
college tuition. Her son was born today and will go to college at
age 18 for four years. Brooke wants to save until her son's first
year of college. Given the following information, what is the
present value of the total amount that Brooke needs to have saved
at the beginning of her son's first year of college? Current
tuition: $16,000 Tuition inflation: 6.5% Brooke's investment
return: 10%
$29,202
$39,010...

Suppose you have a newborn child and want to begin covering
estimated cost of tuition and expenses for four years of college
beginning 18 years from now. Your estimated cost is $40,000 per
year beginning at the end of year 18 and running through the end of
year 21 (4 years). Assume a nominal investment interest rate of 8%
compounded annually.
a. What is the value of the payments at the beginning
of year 18 (end of year 17)?
b....

Suppose you have a newborn child and want to begin covering the
estimated cost of tuition and expenses for four years of college
beginning 18 years from now.
Your estimated cost is $42,000 per year beginning at the end of
year 18 and running through the end of year 21 (4 years). Assume a
nominal interest of 15% compounded annually.
A) What is the value of the payments at the beginning of year 18
(end of year 17)?
B) How...

You
have been accepted into college. The college guarantees that your
tuition will not increase for the four years you attend college.
The first $10,000 tuition payment is due in six months. After that,
the same payment is due every six months until you have made a
total of eight payments. The college offers a bank account that
allows you to withdraw money every six months and has a fixed APR
of 3.9% (with semiannual compounding) guaranteed to remain the...

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