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The parents of a newborn baby would like to put money away today to cover all...

The parents of a newborn baby would like to put money away today to cover all of the child’s expected total 4-years of college tuition. The first tuition payment is due exactly 18 years from today, and the next three payments are due at the end of years 19, 20 and 21. Suppose that the parents estimate that the cost of tuition will be $86,000 per year for the first three years, but that the fourth year’s tuition will be $96,000. Which comes closest to the amount of money that needs to be set aside today if the interest rate is 5%?

a.

$ 136,639
b.

$ 113,608
c.

$ 198,781
d.

$ 164,649
e.

$ 154,633
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PV FACTOR = 1/(1+r)^n

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