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Linda is 10 years old. Her parents want to save for 4 years of college, starting at 18. Her parents want to deposit $X today
Linda is 10 years old. Her parents want to save for 4 years of college, starting at 18. Her parents want to deposit $X today and on birthdays 11, 12, 17. On birthdays 18, 19, 20, 21, they plan to take out $20,000the cost of college. How much do her parents need to save each year? Assume the discount rate is 10%. Solve using the three ways discussed in class. [2.5 points] a. Using trial and error, is $4,000/per year enough? [1 point] b. Using Goal Seek, solve for the annual deposit necessary to meet their financial goals. Write the inputs used in the goal seek equation below the answer. [0.5 points] c. Using PMT, solve for the annual deposit necessary to meet their financial goals. Hint: in this example, you will need to convert your $20,000 4-year annuity liability into one value, before solving for the necessary payment. [1 point]
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