Question

A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5 years, and she should graduate 4 years later. Currently, the annual cost (for everything - food, clothing, tuition, books, transportation, and so forth) is $12,000, but these costs are expected to increase by 7% annually. The college requires total payment at the start of the year. She now has $9,500 in a college savings account that pays 9% annually. Her father will make six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each of the six payments be? Do not round intermediate calculations. Round your answer to the nearest dollar. [Hint: Calculate the cost (inflated at 7%) for each year of college and find the total present value of those costs, discounted at 9%, as of the day she enters college. Then find the compounded value of her initial $9,500 on that same day. The difference between the PV of costs and the amount that would be in the savings account must be made up by the father's deposits, so find the six equal payments that will compound to the required amount.]

Answer #1

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 6% annually. The college requires total
payment at the start of the year. She now has $10,000 in a college
savings account...

A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $16,000, but these costs are
expected to increase by 5% annually. The college requires total
payment at the start of the year. She now has $9,000 in a college
savings account...

eBook
A father is now planning a savings program to put his daughter
through college. She is 13, plans to enroll at the university in 5
years, and she should graduate 4 years later. Currently, the annual
cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $19,000, but these costs are
expected to increase by 6% annually. The college requires total
payment at the start of the year. She now has $7,000 in a college
savings...

A father is now planning a savings program to put his daughter
through college. She is 13, she plans to enroll at the university
in 5 years, and she should graduate in 4 years. Currently, the
annual cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 6% annually. The college requires that this
amount be paid at the start of the year. She now has $10,000 in...

Problem 5-40
Required annuity payments
A father is now planning a savings program to put his daughter
through college. She is 13, she plans to enroll at the university
in 5 years, and she should graduate in 4 years. Currently, the
annual cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 5% annually. The college requires that this
amount be paid at the start of the year....

Problem 5-40
Required annuity payments
A father is now planning a savings program to put his daughter
through college. She is 13, she plans to enroll at the university
in 5 years, and she should graduate in 4 years. Currently, the
annual cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 5% annually. The college requires that this
amount be paid at the start of the year....

Problem 5-40
Required annuity payments
A father is now planning a savings program to put his daughter
through college. She is 13, she plans to enroll at the university
in 5 years, and she should graduate in 4 years. Currently, the
annual cost (for everything - food, clothing, tuition, books,
transportation, and so forth) is $13,000, but these costs are
expected to increase by 5% annually. The college requires that this
amount be paid at the start of the year....

A parent is now planning a savings program to put a daughter
through college. She is 13 and plans to enroll in college in 5
years, and she should graduate 4 years later. Currently, the annual
cost for college is $15,000 and is expected to increase 4% each
year. The college requires that the costs be paid at the start
(hint: beginning) of each year. The child now has $7,500 saved for
college in an account and is expected to...

A parent is now planning a savings program to put a daughter
through college. She is 13 and plans to enroll in college in 5
years, and she should graduate 4 years later. Currently, the annual
cost for college is $15,000 and is expected to increase 4% each
year. The college requires that the costs be paid at the start
(hint: beginning) of each year. The child now has $7,500 saved for
college in an account and is expected to...

Martha wants to start saving for college. She estimates that she
will need $50,000 when she starts college four years from now. She
plans to save $9,500 this year and increase deposits by 5 percent
annually (payments at the end of each year). She can earn 7 percent
on her savings. Will she meet her savings goal of $50,000 for
college four years from now?

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