Jessica and Jim are thinking of saving money for a child born today (age is 0) for its education at a 4-year college. Payments will begin in exactly 18 years and will be made in four installments on the childs 18th, 19th, 20th, and 21st birthdays at the beginning of the 1^st, 2^nd, 3^rd, and 4^th years of undergraduate studies. It is estimated that the cost of the childs education will be $80,000 per year. Assume the interest rate to be 5%.

1. What is the total amount needed to be saved to meet the cost at 18 years? Use the timeline method to solve this.
2. What is present value of the amount found in part a?
3. Suppose the parent is planning on saving an equal amount at the end of each year to meet this cost for the first 17 years of the childs life. First savings will be made in exactly one year from now. Last savings will be made when the child is 17 years old. What amount is needed to be saved per year?

Solve using Excel

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