Hassan and Kiara are saving for their daughter Amira's college education. Amira just turned 10 (at t
Question:
Hassan and Kiara are saving for their daughter Amira's college education. Amira just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $13,000 a year, but they are expected to increase at a rate of 3.0% a year. Amira should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11).
So far, Hassan and Kiara have accumulated $17,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $5,000 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 7%. How large must the annual payments at t = 5, 6, and 7 be to cover Amira's anticipated college costs?
a. $1,232.08
b. $1,151.48
c. $2,260.38
d. $2,418.61
e. $624.24
Business Forecasting with ForecastX
ISBN: 978-0073373645
6th edition
Authors: Holton wilson, barry keating, john solutions inc