Earn an after-tax rate of return

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Randy and Rosemarie have just had a son. Randy, a financial advisor, knows the importance of planning ahead and would like to begin saving for his child's college education. Both Randy and Rosemarie expect their child to attend private schools and that tuition for such an education will be $25,000 per year (in today's dollars). Tuition has been increasing about 6% a year. $10,000 has been saved for this goal. If the boy is expected to attend four years of college beginning in 18 years, how much should Randy and Rosemarie save at the end of each year for the next 18 years to fund their goal? Assume that Randy and Rosemarie invest in equities and can earn an after-tax rate of return of 9%. (Present all 5 steps in your answer)

Reference no: EM132408145

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