A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5 years, and she should graduate 4 years later. Currently, the annual cost (for everything food, clothing, tuition, books, transportation, and so forth) is $15,000, but these costs are expected to Increase by 6% annually. The college requires total payment at the start of the year. She now has $9,000 in a college savings account that pays 8% annually. Her father will make six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each of the six payments be? (Hint: Calculate the cost (Inflated at 6%) for each year of college and find the total present value of those costs, discounted at 8 %, as of the day she enters college. Then find the compounded value of her Initial $9,000 on that same day. The difference between the PV of costs and the amount that would be in e savings account must be made up by the ather's deposits, so find the six equal payments that will compound to the required amount.) Do not round Intermediate calculations. Round your answer to the nearest dollar.

A father is now planning a savings program to put his daughter through college. She is 13, plans to enroll at the university in 5 years, and she should graduate 4 years later. Currently, the annual cost (for everything food, clothing, tuition, books, transportation, and so forth) is $15,000, but these costs are expected to Increase by 6% annually. The college requires total payment at the start of the year. She now has $9,000 in a college savings account that pays 8% annually. Her father will make six equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each of the six payments be? (Hint: Calculate the cost (Inflated at 6%) for each year of college and find the total present value of those costs, discounted at 8 %, as of the day she enters college. Then find the compounded value of her Initial $9,000 on that same day. The difference between the PV of costs and the amount that would be in e savings account must be made up by the ather's deposits, so find the six equal payments that will compound to the required amount.) Do not round Intermediate calculations. Round your answer to the nearest dollar.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A professor has two daughters that he hopes will one day go to college. Currently, in-state students at the local University pay about $21,413.00 per year (all expenses included). Tuition will increase by 4.00% per year going forward. The professor's oldest daughter, Sam, will start college in 16 years, while his youngest daughter, Ellie, will begin in 18 years. The professor is saving for their college by putting money in a mutual fund that pays about 8.00% per year. Tuition payments are at the beginning of the year and college will take 4 years for each girl. (Sam's first tuition payment will be in exactly 16 years) The professor has no illusion that the state lottery funded scholarship will still be around for his girls, so how much does he need to deposit each year in this mutual fund to successfully put each daughter through college.

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