Question

Congratulations (assume you just had a baby)! You expect your baby to start college 18 years...

Congratulations (assume you just had a baby)! You expect your baby to start college 18 years from today. What college would you like for your baby to attend? Approximately, how much will the four years of tuition, room, and board cost you for your baby to attend this school? How much will you need to save every year (starting today) for you to have this amount in 18 years? Please state your assumed discount rate. You must apply the time value of money concept to solve this problem. Show work (20 points).

UNLV

In-State: 31,940

Homework Answers

Answer #1

Assumed discount rate is 6% per year

r = 0.06

Amount needed in 18 years, FV = $31,940

n = 18

Let's calculate the yearly savings starting today

You will need to save $974.969721935 each year starting today to have $31,940 in 18 years

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