Question

Jamie Lee knows how hard it is to go to school, take on debt, and try to fulfill her dreams. Her sister, Rebecca, recently had a baby girl named Alexis. Jamie Lee would like to set aside a small amount per month towards Alexis's education expenses. Jamie Lee realizes this will not cover all of the costs but, she wants to help in a small way After researching college costs and investments, Jamie Lee has the following information Current cost of college education: $22,500 per year (Alexis will attend college in 18 years for 4 years.) Expected annual inflation: 2% Expected rate of return on investment: 10% Use the table below to determine the estimated annual deposit needed to achieve the education fund. (Use Exhibit 1-A Exhibit 1-B.) Estimated Cost of College Education Current cost of college education (including tuition, fees, room, board, books, travel $ 90,000.00 and other expenses) Years until starting college Expected annual inflation Future value factor (use Exhibit 1-A in Chapter 1 Appendix) Projected future cost of college adjusted for inflation 18 2% 0.00 Estimated Annual Savings Needed Projected future cost of college adjusted for inflation Years until starting college Expected annual rate of return on savings and investments Future value of a series of deposits factor (use Exhibit 1-B in Chapter 1 Appendix) Estimated annual deposit to achieve needed educational fund 0.00 18 10% NaN

Answer 1

Fv factor		1.428246
Projected future cost		$128,542.16

Fv of series of deposit		45.5991731
Annual deposit required		$2,818.96

The above is calculated as per workings below