Rena and Hunter Alesio have two children, ages 5 and 7. The Alesios want to start saving for their children’s education. Each child will spend 6 years at college and will begin at age 18. College currently costs $20,000 per year and is expected to increase at 6% per year. Assuming the Alesios can earn an annual compound return of 12% and inflation is 4%, how much must the Alesios deposit at the end of each year to pay for their children’s educational requirements until the younger child is out of school? Assume that education expenses are withdrawn at the beginning of each year and that the last deposit will be made at the beginning of the last year of the younger child.

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To calculate the annual deposit amount needed to pay for their childrens educational requirements we ... View the full answer