SAVINGS Goals

A family is interested in saving money for their daughter's education.

Today is their daughter's 7th birthday.

Their daughter will enter college eleven years from now on her 18th birthday, and will attend for four years.

All college costs are due at the beginning of the year, so they will have to make payments

on their daughter's 18th, 19th, 20th and 21st birthdays (t = 11, 12, 13, 14).

They estimate that the college their daughter attends will cost $30,000 the first year (t = 11)

AND that the costs will increase 6 percent (6.000%) EACH year (the final college payment will be made 14 years from now).

Determine the total needed to cover the four tuition payments (USE cash flow register, look at the timing, and solve for NPV)

Currently, the family has $25,000.00 in an investment account to get started

They also plan to contribute a fixed amount at the END of each of the next eleven years (t = 1, 2, 3, ... 11).

All their invested money will be in an account which pays 7 percent(7.0000%) interest compounded annually.

DRAW the TIMELINE and enter all information given BEFORE starting your calculations

Show all work on your scratch paper

Enter the $ amount the family will need to contribute to the account in each of the next eleven years on the quiz worksheet

Question:

1. Annual Payment Needed