You just won the lottery and would like to set some money aside to pay...
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You just won the lottery and would like to set some money aside to pay for your childs education. As of today, the tuition cost is $30,000 per year at the undergraduate level and $55,000 per year for a two-year masters program. The rate of inflation for educational services is 3.5% annually and you can invest at a fixed nominal interest rate of 7% APR with annual compounding. Your child will enter a 4-year undergraduate program 16 years from today and upon graduation will immediately enroll in a two-year masters program. Assuming tuition is to be paid at the beginning of the year, find the amount of tuition for years 1-4 of undergraduate education and years 1-2 at the graduate level. How much money will you have to invest today to pay for your childs education? Show all work and round dollar amounts to the nearest cent. You must show all your work, including calculator keystrokes if applicable.
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