A couple wants to save for their daughter's college expense. The daughter will enter college eight years from now, and she will need $50,000, $51,000, $52,000, and $53,000 in actual dollars over four school years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 7% per year, and the annual inflation-free interest rate is 6%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college?(a) $21,838(b) $21,945(c) $22,323(d) $22,538
A couple wants to save for their daughter's college expense. The daughter will enter college eight years from now, and she will need $50,000, $51,000, $52,000, and $53,000 in actual dollars over four school years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 7% per year, and the annual inflation-free interest rate is 6%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college?(a) $21,838(b) $21,945(c) $22,323(d) $22,538
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 16P
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Question
A couple wants to save for their daughter's college expense. The daughter will enter college eight years from now, and she will need $50,000, $51,000, $52,000, and $53,000 in actual dollars over four school years. Assume that these college payments will be made at the beginning of each school year. The future general inflation rate is estimated to be 7% per year, and the annual inflation-free interest rate is 6%. What is the equal amount, in actual dollars, the couple must save each year until their daughter goes to college?
(a) $21,838
(b) $21,945
(c) $22,323
(d) $22,538
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