Amy is 12 years old now and will attend college at age 18. Her parents plan to

Question:

Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs $20,000 per year as of the time when Amy turns to age 18. If her parents have saved $10,000 for this goal. Assume they can invest for 10% per year and inflation is 3.5% per year annually.
1. What's PV of Amy's college cost as of the time when Amy turns to age 18? (College cost happens at the beginning of each year)
2. What's the of what Amy's parents currently saved to the time when Amy turns to age 18?
3. How much more do Amy's parents need to save at the end of each month from now to Amy turns to age 18 in order to be able to fully fund her four-year college?
Compounding
Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will... Future Value
Future value (FV) is the value of a current asset at a future date based on an assumed rate of growth. The future value (FV) is important to investors and financial planners as they use it to estimate how much an investment made today will be worth...