Really stuck on this problem If I have two children, ages 5 and 7. If I wish to

Question

Really stuck on this problem

If I have two children, ages 5 and 7. If I wish to put money away beginning this year to pay for their college education, I need to identify the amount that I must save each year. 

Child 1 will go to college in 11 years. 

Child 2 will go to college in 13 years.

 The annual interest rate will be 10 per cent and will be compounded annually.

I will need $25,000 per child per year of college for four years of college for each child.

 How much must I put away each year beginning at the end of this year?

Explanation / Answer

You need a financial calculator to figure this. Make sure it is set to 1 I/Y for compounded annually. Put in 11 N for years on child 1, 10 in I/Y, Present Value -0 PV, 100,000 (25,000 per year X 4 years) FV for Future Value CPT PMT = $5,396.31 per year. Put in 13 N for years on child 2, 10 in I/Y, Present Value -0 PV, 100,000 (25,000 per year X 4 years) FV for Future Value CPT PMT = $4,077.85 per year.

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