Question

Mr. Parker is creating a college fund for his daughter. He plans to make 13 yearly payments with the first payment of $4000 today on his daughter’s fifth birthday and to increase each payment by 5%. Also, He would expect to earn a 10% annual return on his investment and his daughter will need four withdrawals from this account to pay for her education beginning when she is 18 (i.e. 18, 19, 20, 21).

If the cost of college education would increase by 3% each year, how much would she have on her first year of college career?

Answer 1

IF ANY QUERY, FEEL FREE TO ASK Given Deposit Today Annual Return Increase in Deposit 4000 10% 5% Solution Preparation of Timeline 5 Opening Closing Age Deposits Return Balance Balance 이 4000 400 4400 6 4400 4200 860 9460 9460 441011387 15257 8 15257 4630.5| 1988.8 21876.25 9 21876.25 4862.03) 2673.8 29412.11 10 29412.11] 5105.13) 3451.7| 37968.96 11 37968.961 5360.39| 4332.9| 47662.29 12 47662.291 5628.41) 5329.1| 58619.77 13 58619.771 5909.831 64531 70982.56 70982.561 6205.32) 7718.8| 84906.67| 15 84906.67| 6515.591 9142.2] 100564.49 16 100564.5 6841.37| 10741 118146.45 17 118146.5 7183.44 12533 137862.88] where, Return = (Opening Balance + Deposit) X Rate of return Closing Balance - Opening Balance + Deposit + Return Hence, She Shall have $137862.88 on her first year of college career