Question
Presently college education is increasing at the rate of 7% per year. If currently college cost is running at $21,000 a year, what will the
Presently college education is increasing at the rate of 7% per year. If currently college cost is running at $21,000 a year, what will the Marcottes need to have saved up for Paloma in 7 years and for Joel in 15 years. Assume that the Marcottes are in the 25% tax bracket, and 6.5% for the State taxes. Furthermore you can assume that the Marcottes can earn 1% on their investments. You can use a financial calculator or the TVM formulas to find answers to the following: (remember to state your calculator keystrokes or show your formula components for full credit)
a. How much will they have saved given their current $10,000, and assuming they presently can only save $100 per month for educational funding?
i. By the time Paloma leaves for college?
ii. By the time Joel leaves for college, assuming they do not use savings for Paloma?
iii. How much would college cost be for Paloma's four years?
iv. How much would college cost be for Joel's four year's?
v. What is Paloma's college cost shortfall? (iii. - i.)
vi. What is Joel's college cost shortfall? (iv.-ii.)
vii. What are some saving programs and tools that the Marcottes might consider for these goals?
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