Question

Present value. Prestigious University is offering a new admission and tuition payment plan for all alumni. On the birth of a​ child, parents can guarantee admission to Prestigious if they pay the first​ year's tuition. The university will pay an annual rate of return of 5.5​% on the deposited​ tuition, and a full refund will be available if the child chooses another university. The tuition is expected to be ​$10,000 a year at Prestigious 18 years from now. What would parents pay today if they just gave birth to a new baby and the child will attend college in 18 years? How much is the required payment to secure admission for their child if the interest rate falls to 3.5​%?

Answer 1