Question
You are currently saving for your child's college education. The current cost of college is $10,000 a year. You expect that college costs will continue
You are currently saving for your child's college education. The current cost of college is $10,000 a year. You expect that college costs will continue to increase at a rate of 5 percent a year. Your child is scheduled to begin attending a four-year college 10 years from now (i.e., college payments will be made at t=10, t=11, t=12, and t=13). You currently have $25,000 in an account which earns 6 percent after taxes. You would like to have all of the necessary savings by the time your child enters college, and you would like to contribute a constant amount at the beginning of each of the next 10 years in order to provide the necessary amount. (You want to make 10 equal contributions starting in Year 0 and ending at Year 9.)
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