Kristin and Dan Peterson wonder how much they will need to save to fully fund four years
Question:
Kristin and Dan Peterson wonder how much they will need to save to fully fund four years of college for their daughter, Samantha, who is 12 years old today. She plans to attend college at age 18. They know that their choice of college currently costs $13,000 per year. College costs are increasing 5 percent annually. They feel that it is possible to earn an effective annual rate of 8.3 percent (8 percent compounded monthly), both before and during college.
a. How much will Samantha's first year of college cost?
b. How much do the Peterson's need to fully fund college costs when Samantha begins college?
c. How much do Kristin and Dan need to deposit in an account today to fully fund four years of expenses?
d. How much will they need to save on a monthly basis starting at the end of this month to fully fund four years of expenses?
