Question 18

Richard and Sue wants to provide full funding for their 3 year old daughter who is expected to start college when she is 18. The current annual cost of a 4 year college is $38,000 which is expected to increase by 3.5% per year. They expect to earn 5% on their investment. Calculate the total cost (lump sum amount) that would be sufficient to fund 4 years of college when their daughter turns 18.

ANSWERS

A. $237,034

B. $249, 248

C. $242,025

D. $245,687