Answered step by step
Verified Expert Solution
Question
1 Approved Answer
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
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 1st, 2nd, 3rd, and 4th 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%.
- What is the total amount needed to be saved to meet the cost at 18 years? Use the timeline method to solve this. (6)
- What is present value of the amount found in part a? (4)
- 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? (4)
Please use excel!!
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started