Question
Benjamin and Sarah Redding have three children: Scott, age 4, and twin girls, Janice and Carly, age 1. Benjamin and Sarah would like to provide
Benjamin and Sarah Redding have three children: Scott, age 4, and twin girls, Janice and Carly, age 1.
Benjamin and Sarah would like to provide financial assistance to their children while they attend college. They have decided to provide each child $15,000 (in todays dollars) per year for tuition, room, and board. Any additional funding will be provided by a trust set up by Sarahs parents, student loans, and part-time employment by the children. Today, tuition, fees, and other associated costs average $25,000 for a public university and are expected to increase at a rate of 5% per year. Each child is expected to begin college immediately after graduation from high school at age 18 and attend for four years.
- Assuming an earnings rate of 8%, calculate the amount needed today to fund the childrens college education
- Assuming a rate of return of 8%, calculate the amount they need to save each month to fund the childrens college education. Assume that savings will begin at the end of this month and continue until the youngest children begin college.
- Assuming a rate of return of 8%, calculate the monthly savings needed for education assuming that savings will continue until the childrens college education is completed.
Please show all calculations.
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