Question

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?

Answer 1

Future Value:
FV = PV (1+r)^n
Where r is Int rate per period
n - No. of periods

year	Bal Yrs	CF	FVF @7%	FV of CFs
1	3	$   9,500.00	1.2250	$ 11,637.91
2	2	$   9,975.00	1.1449	$ 11,420.38
3	1	$ 10,473.75	1.0700	$ 11,206.91
4	0	$ 10,997.44	1.0000	$ 10,997.44
FV of CFs deposited				$45,262.64

FV of CFs is $ 45262.64. Hence goal of $ 50000 is not met.