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Your answer is correct. Lucy and Fred want to begin saving for their babys college education. They estimate that they will nLucy and Fred want to begin saving for their baby's college education. They estimate that they will need $200000 in eighteen years. If they are able to earn 6% per annum, how much must be deposited at the beginning of each of the next eighteen years to fund the education?

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Answer #1

Future value = $200,000

Interest rate (i) = 6%

Annual deposit = ?

Time period (n) = 18 year

Since deposit are to be made at the beginning of each year, hence the relevant factor table to be used is future value annuity due factor table.

Future value = Annual deposit x future value annuity due factor (i%, n)

200,000 = Annual deposit x FVADF (6%, 18)

200,000 = Annual deposit x 32.7600

Annual deposit = 200,000/32.7600

= $6,105

Fourth option is the correct option.

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