A family is interested in saving money for their daughter's education. Today is their daughter's 6th birthday.
Question:
A family is interested in saving money for their daughter's education.
Today is their daughter's 6th birthday.
Their daughter will enter college twelve years from now on her 18th birthday, and will attend for five years (planning to complete a master's degree, too!)
All college costs are due at the beginning of the year, so they will have to make payments
on their daughter's 18th, 19th, 20th, 21st and 22nd birthdays (t = 12, 13, 14, 15, 16).
They estimate that the college their daughter attends will cost $23,5000 the first year (t = 12)
AND that the costs will increase 6 percent (6.000%) thereafter EACH year (the final college payment will be made 16 years from now).
Determine the total needed to cover the four tuition payments (USE cash flow register, look at the timing, and solve for NPV)
Currently, the family has $15,000.00 in an investment account to get started
They also plan to contribute a fixed amount at the END of each of the next twelve years (t = 1, 2, 3, ... 12).
All their invested money will be in an account which pays 4.75 percent(4.7500%) interest compounded annually.
Quantitative Analysis for Management
ISBN: 978-0132149112
11th Edition
Authors: Barry render, Ralph m. stair, Michael e. Hanna