Jeff Douglas believes strongly that they should help fully fund the equivalent of a state university education (4 years) for Paul and Marcy. Both sets of grandparents have volunteered to make a lump sum donation (50/50 spilt) to the mutual funds today. In other words, these generous grandparents have stated that they are willing to pool their funds and make a substantial deposit to support an education fund.

If today's cost of that type of college education is $25,000 per year and that it will inflate by 4% per year, how much must the grandparents donate to the mutual funds to fully fund these investments (to meet Jeff's goal)? (Assume that Paul and Marcy will start college in 12 and 11 years respectively. You will need to determine the present value of the future college costs. 

Answer rating: 100% (QA)

To calculate the amount that the grandparents must donate to the mutual funds we need to determine t... View the full answer