Question
You are acting as a financial advisor for a new parent. They would like to create a college fund for their child, with the hopes
You are acting as a financial advisor for a new parent. They would like to create a college fund for their child, with the hopes that their child might attend a prestigious US college.
As a rough estimate, you suggest they want to have enough money in their account to withdraw $5000 per month every month for the duration of a 4-year degree.
You have secured them a nominal interest rate of 6%, compounded monthly.
Clearly show your equations with substituted values in solving the following.
(a) How much will need to be invested in the fund when their child starts university, given this goal?
(b) The child will likely be starting college in 14 years. If they want to make regular monthly contributions to this fund, how much money will each monthly payment need to be to make the goal from part (a)?
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