Suppose you just had a child, now you are planning for his or her college education. She would like to make 43 equal payments over the next 21 years (the first payment will be made immediately, all other payments will be made in 6-month intervals, and the final payment will be made when she turns 21) so that she will be able to cover your expected expenses while you are in school. You expect to pay the expenses on your 18th, 19th, 20th, and 21st birthdays. Assume the current (time period 0) annual cost of college is $6,000, which you expect annual inflation to be 8% for the next 5 years and then 5% thereafter.

If she expects to be able to earn a 4% return every 6 months on her investments (a simple rate of 8% compounded semiannually), what will be the amount of each of the 43 payments?

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Heres how to calculate the amount of each payment needed to cover your expected college expenses considering inflation and investment returns Step 1 C... View the full answer