Question

A father is planning a savings program to put his daughter through college

A father is planning a savings program to put his daughter through college. His daughter in now 13 years old. She plans to enroll at the university in 5 years, and it should take her four yea4rs to complete her eucation. Currently, the cost pr years is 12,500, but these costs are expected to increase by 5% each year. The daughter recently received $7,500 from her grandfather's estate; this money, which was invested in a mutual fund that pays 8% interst compounded annually, will be used to help meet the costs of the daughter's education. The rest of the costs will be met by money that the father will deposit in a savings account. He will make equal deposits to the account in each year beginning today until his daughtr starts college-that is he will make a total of six deposits. These deposits will aslo earn 8% interest.
(a) What will be the present value of the cost of 4 yrs of education at the time the daughter turns 18?
(b) What will be the value of the $7,500 that the daughter received from her grandfather's estate when she starts college at age 18?
(c) If the father is planning to make the first of six deposits today, how large must each deposit be for him to be able to put his daughter through college?

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