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You would like to begin saving for your child's college education
You would like to begin saving for your child's college education. You estimate the tuition will be $70,000 per year for a period of 4 years. Your child will enroll in college 15 years from now. You plan on making annual contributions into a college savings account at the end of each year which you estimate will yield an effective annual rate of return of 7%. How much should you contribute into the savings account annually to have enough saved when your child begins college?
Expert Solution
Calculating value required at 15 years,
Using TVM Calculation
PV = [FV = 0, PMT = 70,000, N = 4, I = 0.07]
PV = $237,104.79
Calculating Annual Deposit required
Using TVM Calculation,
PMT = [PV = 0, FV = 237,104.79, N = 15, I = 0.07]
PMT = $9,435.50
Annual Deposit = $9,435.50
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