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Assume that your parents wanted to have $150,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount each year on your birthday and earned 12.0% per year on their investments b. If they think you will take five years instead of four to graduate and decide to have $190,000 saved just in case, how much would they have to save each year to reach their new goal?

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Answer #1

1 money required 150000 2Ц time period for saving 3 interest rate 18 FVIFA( future value interest rate factor of 5 annuity) 6 amount required per year 7 b) 8 new goal 9amount required per year 55.74971 2690.60 190000 3408.09 10

1 money required 150000 2Ц time period for saving 3 interest rate 18 5 FVIFA( future value interest rate factor of annuity) 1+B3)AB2)-1)/B3 6 amount required per year 7 b) 8 new goal -B1/B5 190000 amount required per year 10 -B8/B5

to calculate the amount of saving required per year

FVIFA has been calculated

and formula used for the amount required per year = money required/ FVIFA

since money required at the end of 18 years is the future value and hence the formula for future value of annuity is used above

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