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: $27,500 per year
(Alexis will attend college in 18 years for 4 years.)
Expected annual inflation: 3%
Expected rate of return on investment: 10%
Use the table below to determine the estimated annual deposit needed to achieve the education fund. (Use Exhibit 1-A Exhibit 1-B.)
Estimated Cost of College Education Current cost of college education (including tuition, fees, room, board, books, travel, and other expenses) Years until starting college Expected annual inflation Future value factor (use Exhibit 1-A in Chapter 1 Appendix) Projected future cost of college adjusted for inflation $ 0.00 $ 0.00 Estimated Annual Savings Needed Projected future cost of college adjusted for inflation Years until starting college Expected annual rate of return on savings and investments Future value of a series of deposits factor (use Exhibit 1-B in Chapter 1 Appendix) Estimated annual deposit to achieve needed educational fund NaN EXHIBIT 1-A Future value (compounded sum) of $1 after a given number of time periods Period 1% 3% 5% 6% 7% 8% 10% 11% 1 1.010 1.020 2 3 4 1.110 1.232 1.368 1.518 1.080 1.166 1.260 1.360 1.469 1.587 1.714 1.060 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1.689 1.100 1.210 1.331 1.464 1.611 1.772 1.949 5 2% 1.020 1.040 1.061 1.082 1.104 1.126 1.149 1.172 1.195 1.219 1.243 1.268 1.294 6 7 1.685 1.870 2.076 8 1.030 1.041 1.051 1.062 1,072 1.083 1.094 1.105 1.116 1.127 1.138 1.149 1.161 1.173 2.144 2.358 9 4% 1.040 1.082 1.125 1.170 1.217 1.265 1.316 1.369 1.423 1.480 1.539 1.601 1.665 1.732 1.801 1.873 1.948 2.026 2.107 2.305 2.558 2.839 10 1.791 11 1.030 1.061 1.093 1.126 1.159 1.194 1.230 1.267 1.305 1.344 1.384 1.426 1.469 1.513 1.558 1.605 1.653 1.702 1.754 1.806 2.094 2.427 3.262 4.384 1.050 1.103 1.158 1.216 1.276 1.340 1.407 1.477 1.551 1.629 1.710 1.796 1.886 1.980 2.079 2.183 2.292 2.407 2.527 2.653 3.386 4.322 12 13 14 15 16 17 1.070 1.145 1.225 1.311 1.403 1.501 1.606 1.718 1.838 1.967 2.105 2.252 2.410 2.579 2.759 2.952 3.159 3.380 3.617 3.870 5.427 7.612 14.974 29.457 2.594 2.853 3.138 3.452 9% 1.090 1.188 1.295 1.412 1.539 1.677 1.828 1.993 2.172 2.367 2.580 2.813 3.066 3.342 3.642 3.970 4.328 4.717 5.142 5.604 8.623 13.268 31.409 74.358 1.319 3.152 3.498 3.883 4.310 4.785 5.311 1.851 1.999 2.159 2.332 2.518 2.720 2.937 3.172 3.426 3.700 3.996 4.316 4.661 6.848 10.063 21.725 46.902 1.898 2.012 2.133 2.261 2.397 2.540 2.693 2.854 3.026 3.207 4.292 5.743 10.286 18.420 1.184 18 19 1.346 1.373 1.400 1.428 1.457 1.486 1.641 1.811 2.208 2.692 5.895 6.544 7.263 3.797 4.177 4.595 5.054 5.560 6.116 6.727 10.835 17.449 45.259 117.390 1.196 1.208 1.220 1.282 1.348 20 25 2.191 2.666 3.243 4.801 30 8.062 13.585 22.892 65.001 184.570 40 1.489 7.040 50 1.645 7.107 11.467 Period 12% 14% 15% 18% 19% 20% 25% 30% 1 2 13% 1.130 1.277 1.443 1.630 1.842 3 4 5 6 7 1.120 1.254 1.405 1.574 1.762 1.974 2.211 2.476 2.773 3.106 3.479 3.896 4.363 8 9 10 11 12 13 1.140 1.300 1.482 1.689 1.925 2.195 2.502 2.853 3.252 3.707 4.226 4.818 5.492 6.261 7.138 8.137 9.276 10.575 12.056 13.743 26.462 50.950 1.150 1.323 1.521 1.749 2.011 2.313 2.660 3.059 3.518 4.046 4.652 5.350 6.153 7.076 8.137 9.358 10.761 12.375 14.232 16.367 32.919 66.212 267.860 1.083.700 16% 17% 1.160 1.170 1.346 1.369 1.561 1.602 1.811 1.874 2.100 2.192 2.436 2.565 2.826 3.001 3.278 3.511 3.803 4.108 4.411 4.807 5.117 5.624 5.936 6.580 6.886 7.699 7.988 9.007 9.266 10.539 10.748 12.330 12.468 14.426 14.463 16.879 16.777 19.748 19.461 23.106 40.874 50.658 85.850 111.070 378.720 533.870 1,670.700 2,566.200 1.180 1.190 1.200 1.392 1.416 1.440 1.643 1.685 1.728 1.939 2.005 2.074 2.288 2.386 2.488 2.700 2.8.40 2.986 3.185 3.379 3.583 3.759 4.021 4.300 4.435 4.785 5.160 5.234 5.696 6.192 6.176 6.777 7.430 7.288 8.064 8.916 8.599 9.596 10.699 10.147 11.420 12.839 11.974 13.590 15.407 14.129 16.172 18.488 16.672 19.244 22.186 19.673 22.091 26.623 23.214 27.252 31.948 27.393 32.429 38.338 62.669 77.388 95.396 143.370 184.680 237.380 750.380 1,051.700 1,469.800 3.927.400 5.998.900 9.100.400 2.082 2.353 2.658 3.004 3.395 3.836 4.335 4.898 5.535 6.254 7.067 7.986 9.024 10.197 11.523 21.231 39.116 132.780 450.740 1.250 1.300 1.563 1.690 1.953 2.197 2.441 2.856 3.052 3.713 3.815 4.827 4.768 6.276 5.960 8.157 7.451 10.604 9.313 13.786 11.642 17.922 14.552 23.298 18.190 30.288 22.737 39.374 28.422 51.186 35.527 66.542 44.409 86.504 55.511 112.460 69.389 146.190 86.736 190.050 264.700 705.640 807.790 2.620.000 7.523.200 36,119.000 70,065.000 497.929.000 14 4.887 15 16 17 18 5.474 6.130 6.866 7.690 8.613 9.646 17.000 29.960 93.051 289.000 19 20 25 30 40 188.880 50 700.230 Exhibit 1-B Future value (compounded sum) of $1 paid in at the end of each period for a given number of time periods (an annuity) Period 1% 2% 3% 4% 5% 6% 7% 8% 9% 10% 1 1 1 1 1 1 1 1 1 1 1 2 2.01 2.02 2.03 2.04 2.05 2.06 2.07 2.08 2.09 2.1 3 3.03 3.06 3.091 3.122 3.153 3.184 3.215 3.246 3.278 3.31 4 4.06 4.122 4.184 4.246 4.31 4.375 4.44 4.506 4.573 4.641 5 5.101 5.204 5.309 5.416 5.526 5.637 5.751 5.867 5.985 6.105 6 6.152 6.308 6.468 6.633 6.802 6.975 7.153 7.336 7.523 7.716 7 7.214 7.434 7.662 7.898 8.142 8.394 8.654 8.923 9.2 9.487 8 8.286 8.583 8.892 9.214 9.549 9.897 10.26 10.637 11.028 11.436 9 9.369 9.755 10.159 10.583 11.027 11.491 11.978 12.488 13.021 13.579 10 10.462 10.95 11.464 12.006 12.578 13.181 13.816 14.487 15.193 15.937 11 11.567 12.169 12.808 13.486 14.207 14.972 15.784 16.645 17.56 18.531 12 12.683 13.412 14.192 15.026 15.917 16.87 17.888 18.977 20.141 21.384 13 13.809 14.68 15.618 16.627 17.713 18.882 20.141 21.495 22.953 24.523 14 14.947 15.974 17.086 18.292 19.599 21.015 22.55 24.215 26.019 27.975 15 16.097 17.293 18.599 20.024 21.579 23.276 25.129 27.152 29.361 31.772 16 17.258 18.639 20.157 21.825 23.657 25.673 27.888 30.324 33.003 35.95 17 18.43 20.012 21.762 23.698 25.84 28.213 30.84 33.75 36.974 40.545 18 19.615 21.412 23.414 25.645 28.132 30.906 33.999 37.45 41.301 45.599 19 20.811 22.841 25.117 27.671 30.539 33.76 37.379 41.446 46.018 51.159 20 22.019 24.297 26.87 29.778 33.066 36.786 40.995 45.762 51.16 57.275 25 28.243 32.03 36.459 41.646 47.727 54.865 63.249 73.106 84.701 98.347 30 34.785 40.568 47.575 56.085 66.439 79.058 94.461 113.283 136.308 164.494 40 48.886 60.402 75.401 95.026 120.8 154.762 199.635 259.057 337.882 442.593 50 64.463 84.579 112.797 152.667 209.348 290.336 406.529 573.77 815.084 1163.909 11% 1 2.11 3.342 4.71 6.228 7.913 9.783 11.859 14.164 16.722 19.561 22.713 26.212 30.095 34.405 39.19 44.501 50.396 56.939 64.203 114.413 199.021 581.826 1668.771 20% 30% 1 1 2 2.3 3 4 5 1 2.2 3.64 5.368 7.442 9.93 6 7 12% 1 2.12 3.374 4.779 6.353 8.115 10.089 12.3 14.776 17.549 20.655 24.133 28.029 32.393 37.28 8 9 10 11 12 13 13% 1 2.13 3.407 4.85 6.48 8.323 10.405 12.757 15.416 18.42 21.814 25.65 29.985 34.883 40.417 46.672 53.739 61.725 70.749 80.947 155.62 293.199 1013.704 3459.507 14% 1 2.14 3.44 4.921 6.61 8.536 10.73 13.233 16.085 19.337 23.045 27.271 32.089 37.581 43.842 50.98 59.118 68.394 78.969 91.025 181.871 356.787 1342.025 4994.521 15% 1 2.15 3.473 4.993 6.742 8.754 11.067 13.727 16.786 20.304 24.349 29.002 34.352 40.505 47.58 55.717 65.075 75.836 88.212 102.444 212.793 434.745 16% 1 2.16 3.506 5.066 6.877 8.977 11.414 14.24 17.519 21.321 25.733 30.85 36.786 43.672 51.66 60.925 71.673 84.141 98.603 115.38 249.214 530.312 2360.757 10435.649 17% 1 2.17 3.539 5.141 7.014 9.207 11.772 14.773 18.285 22.393 27.2 32.824 39.404 47.103 56.11 66.649 78.979 93.406 110.285 130.033 292.105 647.439 3134.522 15089.502 18% 1 2.18 3.572 5.215 7.154 9.442 12.142 15.327 19.086 23.521 28.755 34.931 42.219 50.818 60.965 72.939 87.068 103.74 123.414 146.628 342.603 790.948 4163.213 21813.094 19% 1 2.19 3.606 5.291 7.297 9.683 12.523 15.902 19.923 24.709 30.404 37.18 45.244 54.841 66.261 79.85 96.022 115.266 138.166 165.418 402.042 966.712 5529.829 31515.336 25% 1 2.25 3.813 5.766 8.207 11.259 15.073 19.842 25.802 33.253 42.566 54.208 68.76 86.949 109.687 138.109 173.636 218.045 273.556 342.945 1054.791 3227.174 30088.655 280255.693 3.99 6.187 9.043 12.756 17.583 23.858 32.015 42.619 56.405 74.327 97.625 127.913 167.286 218.472 285.014 371.518 483.973 630.165 2348.803 8729.985 120392.883 1659760.743 12.916 16.499 20.799 25.959 32.15 39.581 48.497 59.196 72.035 87.442 105.931 128.117 154.74 186.688 471.981 1181.882 7343.858 45497.191 14 15 42.753 16 17 18 19 20 25 30 40 50 48.884 55.75 63.44 72.052 133.334 241.333 767.091 2400.018 1779.09 7217.716
