Present Value of Future Payment Lucille will graduate from high school four years from now. Her parents have estimated that they will need $120,000 to cover the costs of her college education at that time. Assuming deposits earn 6 percent annual interest:

a. How much would Lucille’s parents need to deposit immediately as a single payment to assure the required amount is available in four years?

b. How much would they need to deposit annually at the end of each of the next four years to assure the required amount is available?

c. Why must Lucille’s parents contribute more total dollars under the second alternative?