I need help with 12, 13, 14. Please check 8, 9, 10, 11

Saving for College

The following questions are based on this scenario:

You want to start a savings program for a college fund for your daughter. She is currently two

years old (t=0) and will start college when she is 18 (t=16). Assume you are currently 30 years

old.

College education currently costs $90,000 per year at a private university like

Northwestern, including room and board.

You expect your daughter will attend college for four years.

Assume the costs of a college education grow at a 10% rate per year.

You want to save the same amount (in nominal terms, i.e., not adjusted for inflation)

each year starting next year, and your savings program will end when you daughter is

17, at t=15.

Assume that the market interest rate is 2%. You earn this interest on your savings.

8)Based on the above, what are the expected costs of college education at t=16? 413,548

9)Based on the above, what are the expected costs of college education at t=17? 454,902

10)Based on the above, what are the expected costs of college education at t=18? 500,392

11)Based on the above, what are the expected costs of college education at t=19? 550,432

12)How much cash must you have in the bank when your daughter is 17 to fund her four

years of college; i.e., what is the present value at t=15 of the costs calculated in

questions 8-11?

13)How much cash must you have in the bank today to fund her four years of college; i.e.,

what is the present value at t=0 of the costs calculated in questions 8-11?

14)How much must you save each year (the same nominal amount each year), starting next

year, such that you will have enough saved for your daughter's education?