You plan to start saving for your son’s college education. He will begin college
ID: 2652396 • Letter: Y
Question
You plan to start saving for your son’s college education. He will begin college when
he turns 18 years old and will need $4,000 at that time and in each of the following
three years. You will make a deposit at the end of this year in an account that pays 6% compounded annually as well as an identical deposit at the end of each year,
with the last deposit occurring when he turns 18. If an annual deposit of $1,484 will
allow you to reach your goal, how old is your son now?
Plz show how to use the calculator, and let me know the answer!
Thank you very much
Explanation / Answer
Answer:-
When college begin age = 18 years and at that time money need $4000 this year and next 3 years same amount
Interest Rate = 6%
Annual Deposit of $1484 will allow to reach the goal
Investment at current period = Present Value at (r,n)
Assume Year = 8 years
And at the end of the 8th year your son,s turns 18 years old
Total Amount deposit = Annual deposit * PVIFA at (r,n)
= 1484 * PVIFA (6% , 8 years)
= 1484 * 6.209
= 9214
Total Amount Deposited = Total Amount of college deposit
9214 = 9214
Age of son now = 18 years - 8 years
= 10 years
Age Money need 18 year $4000 19 year $4000 20 year $4000 21 year $4000Related Questions
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