Your daughter will start college one year from today, at which time the first tu

Question

Your daughter will start college one year from today, at which time the first tuition payment of $58,000 must be made. Assume 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, provided that you have to pay 35% per annum in taxes on any earnings (e.g., interest on the savings)? *Make sure to input all currency answers without any currency symbols or commas, and use two decimal places of precision. Enter answer her e

Explanation / Answer

The tution fee is paid at starting of the year.

Coupon is 58,000

N is 4

Yield is 5%, post tax yield will be 0.65×5% = 3.25%

FV is 0

So PV is 214309.02 is the amount required in the account.

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