Jack and Jill have just had their first child. If college is expected to cost $150,000 per year in 18 years, how much sh...
Jack and Jill have just had their first child. If college is expected to cost $150,000 per year in 18 years, how much should the couple begin depositing annually at the end of each of the next 18 years to accumulate enough funds to pay 1 year of tuition 18 years from now? Assume that they can earn a 6% annual rate of return on their investment.
Homework Answers
Required amount after 18 years = 150,000
Rate of interest = 6%
Let the funds required each year be x
Future value of annuity = x*[{(1.06)^18 - 1}/0.06]
150,000 = x*30.905652
x = $4,853.48
Hence, annual deposits required = $4,853.48
CF=FV
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