Joseph and Raine Jones want to begin saving yearly for the college education of
ID: 2808279 • Letter: J
Question
Joseph and Raine Jones want to begin saving yearly for the college education of their children. They have two children, a 1-year-old and a 5-year-old. They would like to make the first contribution to the children's college fund a year from today. They assume the children will begin their college education when they reach the age of 18. They would like each child to attend an in-state public university and the current cost of college is $23,000 each year per child. Assume that the cost of college is anticipated to increase at an inflation rate of 5.5% per year, while the CPI is expected to remain at 3.5% per year Joseph and Raine already have $42,000 invested ina college fund. Assume that they can get a return of 8% on their invested funds prior to and during college Help Joseph and Raine determine how much they will need to save each year to reach their goalExplanation / Answer
Cost of College Today 23000 per year Cost of College for 5 year old kid Cost of College for 1 year old kid 13 years hence - 1st year 46132.80 17 years hence -1st year 57150.45 2nd year 48670.10 2nd year 60293.72 3rd year 51346.96 3rd year 63609.88 4th year 54171.04 4th year 67108.42 So Fund required at start of 1st year discounted at 8% 178222.17 So Fund required at start of 1st year discounted at 8% 220786.02 So amount required at years Amount Amount at 13 yrs discounted at 8% 13 178222.17 178222.17 17 220786.02 162284.32 Total 340506.49 PMT $10,527.06 =-PMT(8%,13,-42000,340506.49,) Required saving $10,527.06
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.