Difference in present value terms between the two plans

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Your sending your daughter to a prestigious private college starting next year. She will attend for four years. The current cost for one year is $60,000, but is expected to rise 2% per year over the next 10 years. The school has a “tuition stabilization” plan whereby you can pay for the entire four years by writing a single check for $240,000 when your daughter begins college. Otherwise, you simply pay each year’s tuition as you go. If your investments earn 6% per year, what is the difference in present value terms between the two plans?

Reference no: EM131956575

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