123456 4 5 6 7 PROBLEM (6) SAVING FOR COLLEGE We need to save for our child's expected college costs. We have cash flow restrictions, so need to save/invest now so as to NOT have to born lots of money when she reaches 18. Each deposit happens at the day of each birthday (or you can treat it as the beginning of each year), sinc 10th birthday, till 18th birthday when we start to pay for the college (no deposit at the 18th birthday, i.e. the final deposit is on 17th birthday We expect our investments to earn 8% over the next several years. The annual college cost is $20,000 for four years, at the beginning of each year. 1. If we deposit $4,000 each year, how much money will be left in your accout or be owned to the bank at the beginni of 22th birthday, given a 10% interest rate your bank charges on your borrowing (i.e interest rate is 8% if your balar is positive, and interest rate is 10% if your balance is negative). Answer: 8 9 Interest rate earned on investment 10 Interest rate charged on borrowing 11 Annual deposit 12 Annual cost of college Account ha 8% 10% 4,000.00 20,000.00 Domenic

We need to save for our child's expected college costs. We have cash flow restrictions, so need to save/invest now so as to NOT have to bor lots of money when she reaches 18. Each deposit happens at the day of each birthday (or you can treat it as the beginning of each year), sin 10 th birthday, till 18th birthday when we start to pay for the college (no deposit at the 18th birthday, i.e. the final deposit is on 17 th birthda We expect our investments to earn 8% over the next several years. The annual college cost is $20,000 for four years, at the beginning of eacl year. 1. If we deposit $4,000 each year, how much money will be left in your accout or be owned to the bank at the beginn of 22 th birthday, given a 10% interest rate your bank charges on your borrowing (i.e interest rate is 8% if your balar is positive, and interest rate is 10% if your balance is negative)