You have just had your first child and want to fund her college education. You anticipate that
Question:
You have just had your first child and want to fund her college education. You anticipate that she will start college in 18 years. You estimate by then you will need $50,000 a year to cover her tuition at Northeastern, and the associated expenses. You are hoping your daughter will only take five years to complete her education. You therefore are planning on having to provide $25,000 every six months for five years beginning 18 years from today. You cannot afford to start saving today, but will begin making yearly deposits 5 years from now, with you last deposit being the year before the first withdrawal of $25,000. The appropriate discount rate is 8% compounded monthly. How much do you need to deposit each year?
Contemporary Financial Management
ISBN: 9780324289114
10th Edition
Authors: James R Mcguigan, R Charles Moyer, William J Kretlow