Dontrell and Hannah are saving for their daughter Kennedy's college education. Kennedy just turned 10 (at t = 0), and shewill be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $12,500 a year, butthey are expected to increase at a rate of 4.0% a year. Kennedy should graduate in 4 years--if she takes longer or wants to goto graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8,9, 10, and 11).So far, Dontrell and Hannah have accumulated $8,000 in their college savings account (at t = o). Their long-run financialplan is to add an additional $4,500 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annualcontributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 8%. How large mustthe annual payments at t = 5, 6, and 7 be to cover Kennedy's anticipated college costs?O a. $7,263.16b. $6,367.48c. $7,844.22d. $6,876.88e. $5,657.51

Data given: Current college tuition and expenses = $12500 Rate of increase in above rate per…

Answered: Dontrell and Hannah are saving for…

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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