Sheldon Cooper and Amy Fowler are married and live in Pasadena, California. They

Question

Sheldon Cooper and Amy Fowler are married and live in Pasadena, California. They have as a new investment goal to create a college fund for their newborn daughter. They estimate that they will need $192,000 in 18 years. Assuming that the Cooper-Fowler family could obtain a return of 5 percent, how much would they need to invest annually to reach their goal? Use Appendix A.3 (attached on Canvas) or the Garman/Forgue companion website. Round your answer to the nearest dollar. Round ‘Future Value of a Series of Equal Amounts’ in intermediate calculations to four decimal places.

Explanation / Answer

Future value of annuity = Annuity * [( 1 + R)n - 1] / R

192,000 = Annuity *[( 1 + 0.05)18 - 1] / 0.05

192,000 = Annuity *[ 1.4066 ] / 0.05

192,000 = Annuity * 28.132

Annuity = $6,825

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