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Your dad found out you were taking a finance course and asked you to estimate how much he should save for your little sister Sofia's
Your dad found out you were taking a finance course and asked you to estimate how much he should save for your little sister Sofia's education. It gives you the following information: Sofia will be entering university (a 4-year degree) in exactly 12 years. In 12 years, college will cost $40,000 per year and grow at the rate of 3% per year. College payments are due at the start of the school year. (So the first installment is due in 12 years, starting the day after your father opened Sofia's account.). Your father will invest each year (at the end of each year) in an account today with a nominal rate of 6% annually compounded. Finally, Sofia's aunt promises to deposit $5,000 into the account when Sofia turns 16 in exactly 10 years (only one deposit from her aunt). How much would your dad have to deposit each year for the next 12 years to be able to send Sofia to college? (Please note that the last payment made by your dad will be on the day of Sofia's first tuition payment.)
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