Question
Your son, Charlie, has just turned 15. Charlie plans to go to college to study electronics on his 18th birthday. College is expected to cost
Your son, Charlie, has just turned 15. Charlie plans to go to college to study electronics on his 18th birthday. College is expected to cost Charlie $15,000, $16,000, $17,000 and $18,000 for each of his four years in college. You want these funds to be available to him at the beginning of each year in college. In addition, you want to give Charlie a $25,000 graduation gift on his 22nd birthday so that he can get a start on his career or on graduate school. You currently have $8,000 to meet these obligations. You want to save an equal amount at the end of each of the next six years to meet the remaining obligations. If your investments earn 10 percent pretax and your marginal tax rate is 30%, how much must you save at the end of each of the next six years? (Hint: Remember that only the interest income is taxable, not the entire distribution.) SHOW ALL WORK DETAIL
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