Question
Youve been saving for your childs college her whole live and have $200,000 saved for her. The college she chooses has a contracted-in-advance room, board,
Youve been saving for your childs college her whole live and have $200,000 saved for her. The college she chooses has a contracted-in-advance room, board, and tuition plan so you will know exactly how much expenses will go up every year. You can contract for the following costs:
Year | 0 (i.e., now) | 1 | 2 | 3 |
Cost | $35,000.00 | $35,700.00 | $36,414.00 | $37,142.28 |
Further, the college will allow you to simply hand over the present value of the cash flows and they will invest it at a 2.5% rate while she is in college. If you give the college the PV of the cash flows today, how much money will you have left to invest in your new fishing cabin? a) $66,043.70 b) $64,410.79 c) $55,743.72 d) $61,021.06
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