Question

Your new born child will be starting college in 18 years. You expect your child's college...

Your new born child will be starting college in 18 years. You expect your child's college education to cost $19,270 per year, due at the beginning of each year. How much must you set aside at the end of each year for your child to attend four years of college. You will not make any more deposit after the child turns 18. Assume an interest rate of 9.06%.

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Answer #1

$ 1,636.64

Step-1:Present value of annuity
Present Value =pv(rate,nper,pmt,fv)
= $ 67,995.94
Where,
rate = 9.06%
nper = 4
pmt = $       -19,270
fv = 0
1 = At the beginning of year
Step-2:Annual deposit
Annual deposit =-pmt(rate,nper,pv,fv)
= $ 1,636.64
Where,
rate = 9.06%
nper = 18
pv = 0
fv = $   67,995.94
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