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"Mr. and Mrs. Smith want to start saving for their four-year-old son, Jack, to go to...

"Mr. and Mrs. Smith want to start saving for their four-year-old son, Jack, to go to college. They estimate current college costs for their area to be $20,000 per year, and they estimate that cost will increase at 5% per year. How much should they estimate Jack s first year of college will cost (assuming he starts college at 18)?"

Please show how to get TMV calculations to input into calculator.

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Answer #1
Jack is 4 years old.
He will start college at 18.
His first year of college will start in (18-4) 14 years.
Calculate the future value of current college costs
in fourteen years.
Future Value = Present Value*((1+r)^t)
where r is the interest rate that is 5% and t is the time period in years that is 14.
Present value is $20000.
Future value = 20000*((1.05)^14)
Future value = 20000*(1.979932)
Future value = 39598.63.
Jack s first year of college is estimated to cost $39599.
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