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You are saving for the college education of your child. You estimate your child's college expenses...

You are saving for the college education of your child. You estimate your child's college expenses to be $30,000 per year and payable at the beginning of each academic year. The annual interest rate is 5% and it is not expected to change. You will also have to pay $17,000 at the end of year 3 and $1,000 at the end of year 4.

At the point your child is about to start college, what is the present value of the child's education?

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Answer #1

Calculation of Present Value

Present Value = Cash Flows / (100+5%)^Years

Amount in $

Therefore, the present value of child's college education at the time of start of college is $127,205.38

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