Problem 3. Paying for School Your daughter will start college one year from toda

Question

Problem 3. Paying for School Your daughter will start college one year from today, at which time the first tuition payment of $58,000 must be made. Assuming that tuition does not increase over time and that your daughter remains in school for four years, how much money do you need today in your savings account, earning 5% per annum, in order to make the tuition payments over the next four years ? *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision.

Explanation / Answer

Details Year 1 Year 2 Year 3 Year 4 Tution fees required per annum                 58,000             58,000           58,000            58,000 PV factor @5%                   0.952                0.907             0.864               0.823 PV of Tution fees =                 55,238             52,608           50,103            47,717 Total of PV of Tution Fees =              205,665 So the amount to be deposited today in savings a/c is $205,665

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