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Concerns: Youngs want to know the cost of college education for the two children so that they can approach Angel's father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don't know, they expect the S529 Plan's investment rate to be 8.5%. Step 1: Calculate the inflation-adjusted, six-year cost of each child's college education N = ÉV = PMT = PV= Step 2: Calcu the present value of the lump-sum cost of cach child's six years of college. For the 4 old For the 2 year old FV FV N PMT PV PMT PV Total PV of two children: Step 3: Calculate the payment needed to each child's 529 Plan For the 4 old For the 2 year old PV PV N FV FV PMT PMT %3D Total annual cost of savings: II I I I| II II I I II

Concerns: Youngs want to know the cost of college education for the two children so that they can approach Angel's father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don't know, they expect the S529 Plan's investment rate to be 8.5%. Step 1: Calculate the inflation-adjusted, six-year cost of each child's college education N = ÉV = PMT = PV= Step 2: Calcu the present value of the lump-sum cost of cach child's six years of college. For the 4 old For the 2 year old FV FV N PMT PV PMT PV Total PV of two children: Step 3: Calculate the payment needed to each child's 529 Plan For the 4 old For the 2 year old PV PV N FV FV PMT PMT %3D Total annual cost of savings: II I I I| II II I I II

Essentials Of Investments
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
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### Concerns: Youngs want to know the cost of college education for the two children so that they can approach Angel’s father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don’t know, they expect the 529 Plan’s investment rate to be 8.5%. ### Step 1: Calculate the inflation-adjusted, six-year cost of each child’s college education ``` N = i = FV = PMT= PV = ``` ### Step 2: Calculate the present value of the lump-sum cost of each child’s six years of college. ``` For the 4-year-old For the 2-year-old FV = FV = N = N = i = i = PMT = PMT= PV = PV = ``` - **Total PV of two children:** ### Step 3: Calculate the payment needed to reach each child’s 529 Plan ``` For the 4-year-old For the 2-year-old PV = PV = N = N = i = i = FV = FV = PMT = PMT= ``` - **Total annual cost of savings:** ### Your Recommendations: (Provide your analysis and recommendations based on the calculations above) This structured calculation guide helps Youngs estimate the future college costs for their children and assists in planning for fully funding their education through 529 Plans. It's crucial to adjust for inflation and calculate the present value to understand how much needs to be invested annually to achieve the savings goal.
Transcribed Image Text:### Concerns: Youngs want to know the cost of college education for the two children so that they can approach Angel’s father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don’t know, they expect the 529 Plan’s investment rate to be 8.5%. ### Step 1: Calculate the inflation-adjusted, six-year cost of each child’s college education ``` N = i = FV = PMT= PV = ``` ### Step 2: Calculate the present value of the lump-sum cost of each child’s six years of college. ``` For the 4-year-old For the 2-year-old FV = FV = N = N = i = i = PMT = PMT= PV = PV = ``` - **Total PV of two children:** ### Step 3: Calculate the payment needed to reach each child’s 529 Plan ``` For the 4-year-old For the 2-year-old PV = PV = N = N = i = i = FV = FV = PMT = PMT= ``` - **Total annual cost of savings:** ### Your Recommendations: (Provide your analysis and recommendations based on the calculations above) This structured calculation guide helps Youngs estimate the future college costs for their children and assists in planning for fully funding their education through 529 Plans. It's crucial to adjust for inflation and calculate the present value to understand how much needs to be invested annually to achieve the savings goal.
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