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.) How much should you contribute to the account each year in order to fully provide for your child's education?
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.) How much should you contribute to the account each year in order to fully provide for your child's education?
Related questions
| You are saving for the college education of your two children. They are two years apart in age; one will begin college 16 years from today and the other will begin 18 years from today. You estimate your childrenâs college expenses to be $36,000 per year per child, payable at the beginning of each school year. The annual interest rate is 6.6 percent. Your deposits begin one year from today. You will make your last deposit when your oldest child enters college. Assume four years of college. |
| How much money must you deposit in an account each year to fund your childrenâs education? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16)) |
Suppose you have a one year old child and you want to make an investment for future education expenses on your child's 18th birthday. Which of the following investments would be the most appropriate if you want to avoid the effects of changes in interest rates between now and the time your child enters college?
| a. | A 20 year 8% coupon bearing bond. | |
| b. | A 20 year zero coupon bond. | |
| c. | A 17 year 8% coupon bearing bond. | |
| d. | A 17 year 5% coupon bearing bond. | |
| e. | A 17 year zero coupon bond. |
