Continuing Case 19. College Education Savings Plan

Jamie Lee knows how hard it is to go to school, take on debt, and try to fulfill her dreams. Her sister, Rebecca, recently had a baby girl named Alexis. Jamie Lee would like to set aside a small amount per month towards Alexiss education expenses. Jamie Lee realizes this will not cover all of the costs but, she wants to help in a small way.

After researching college costs and investments, Jamie Lee has the following information:

Current cost of college education: $17,500 per year

(Alexis will attend college in 18 years for 4 years.)

Expected annual inflation: 3%

Expected rate of return on investment: 11%

Use the table below to determine the estimated annual deposit needed to achieve the education fund. (Use Exhibit 1-A Exhibit 1-B.)