What sum of money must be set aside at a child's birth to provide for 260 weekly payments of $80 to cover the expenses for a university education if the first payment is to be made on the child's 18th birthday and interest on the savings is 9.1%/year compounded weekly?
| Step-1:Calculation of present value of weekly payments on 18th birthday | ||||||||||
| Present value | =-pv(rate,nper,pmt,fv,1) | Where, | ||||||||
| = $ 16,728.64 | rate | = | 9.1%/52 | = | 0.00175 | |||||
| nper | = | 260 | ||||||||
| pmt | = | 80 | ||||||||
| fv | = | 0 | ||||||||
| 1 | = | Payment at the beginning of period | ||||||||
| Step-2:Calculation of amount to be deposited today | ||||||||||
| Amount to be deposited today | =-pv(rate,nper,pmt,fv) | Where, | ||||||||
| = $ 3,256.18 | rate | = | 9.1%/52 | = | 0.00175 | |||||
| nper | = | 18*52 | = | 936 | ||||||
| pmt | = | 0 | ||||||||
| fv | = | $ 16,728.64 | ||||||||
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