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Exercise 5- Help me with the following: My son is currently in Kindergarten. When he was born, we opened a college savings plan and currently
Exercise 5- Help me with the following: My son is currently in Kindergarten. When he was born, we opened a college savings plan and currently have $5000 in his account Assuming he starts college after he graduates from high school, how much must I put in his account each year, including the 4 years he is in college, such that $0emain in his account upon graduation. a) What will be the cost of education (tuition only) when he is ready to start college? Let's make the following assumptions. The current tuition for college in a public institution is $8,000. It is increasing at a rate of 6% per year. What will the cost be in each of the 4 years he is in college? b) Create the cash flow diagram, starting with the $5000 currently in the account, and noting the annual installments I will make starting at the end of year1 through his last year in college, and note the cash outflows from the account for the 4 years he is in college. c) Determine the annual installments that I must put into his account such that S0 will remain in his account upon graduation. Assume a 6% interest rate. d) What are the annual installments if college tuition increases at 9% per year? e) What are the annual installments if college tuition increases 9% per year, but the college savings plan returns only 5% per year
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