Daniel and Amira are saving for their daughter Kaliah's college education. Kaliah just turned 10...
50.1K
Verified Solution
Link Copied!
Question
Finance
Daniel and Amira are saving for their daughter Kaliah's college education. Kaliah just turned 10 (at t = 0), and she will be entering college 8 years from now (at t = 8). College tuition and expenses at State U. are currently $13,500 a year, but they are expected to increase at a rate of 4.5% a year. Kaliah should graduate in 4 years--if she takes longer or wants to go to graduate school, she will be on her own. Tuition and other costs will be due at the beginning of each school year (at t = 8, 9, 10, and 11). So far, Daniel and Amira have accumulated $11,000 in their college savings account (at t = 0). Their long-run financial plan is to add an additional $6,000 in each of the next 4 years (at t = 1, 2, 3, and 4). Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 7%. How large must the annual payments at t = 5, 6, and 7 be to cover Kaliah's anticipated college costs?
a. $5,908.40
b. $7,417.16
c. $6,931.93
d. $6,321.98
e. $4,980.24
Answer & Explanation
Solved by verified expert
Get Answers to Unlimited Questions
Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!
Membership Benefits:
Unlimited Question Access with detailed Answers
Zin AI - 3 Million Words
10 Dall-E 3 Images
20 Plot Generations
Conversation with Dialogue Memory
No Ads, Ever!
Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
