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A girl s parents wish to save money for her college education starting at birth. The girl s grandparents offered an initial investment of $

A girls parents wish to save money for her college education starting at birth. The girls grandparents offered an initial investment of $5000 right at the moment she is born (i.e. in Year 0). Tuition costs are expected to be $40,000 per year in the 18th,19th,20th, and 21st years of the girls life. The parents are able to invest $2000 a year for 5 years, starting on the 5th year of her life (years 5,6,7,8,9, and 10). Starting in year 11, they will be able to increase their investment amounts by a flat amount each year (so each year will have a flat amount more than the last year for years 9 through 17). The parents will stop investing money after year 17. How much will the family have to increase their contributions in order to make the tuition payments? Assume a 5% interest rate. Draw the cash flow diagram to help you visualize the cash flows.
Ans: $3064.19

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