Mary Jane and Larry Luckee's Portfolio

Mary Jane and Larry Luckee were thrilled to welcome their first child into their family.Baby Ima Doll Luckee was born on July 1, 2018.Because both Mary Jane and Larry are college graduates, they fully expect Ima to want to go to college in 18 years.Their alma mater sent them a letter stating that the total cost of tuition for 4 years for a student entering their college in 2036 would be $200,000.They would like to set up a fund for Ima immediately.When they checked with the bank, they found out that they could expect a 5% interest rate for the next 18 years.

The Luckees have $7,000 in a savings account and would be able to invest the full amount into this new account so Ima can go to college.Thereafter, they would add an additional $7,000 annually for 18 years into Ima's college account.

Answer the Following:

If the Luckees invest these equal annual payments of $7,000, will they have enough money to pay the tuition for Ima in 18 years? Explain with calculations.

Will they be over or short?

What is your advice to the Luckees?