Exercise $21$: A couple with a newborn daughter want to save for

their child's college expenses in advance. The couple can

establish a college fund that pays $7\%$ annual interest. Assuming

that the child enters college at age $18,$ the parents estimate that

an amount of $$40000$ per year will be required to support the

child's college expenses for $4$ years. Determine the equal

TIME VALUE OF MONEY

annual amounts the couple must save until they send their child

to college. $($Assume that the first deposit will be made on the

child's first birthday and the last deposit on the child's $18$th

birthday. The first withdrawal will also be made at the beginning

of the freshmen year, which is the child's $18$th birthday.$)$ Draw

the CF diagram, list all the variables, and compute the deposit

amounts, $A,$ the parents have to make every year. Compute this

using both methods the future worth and present worth.