Find out how much alecia will have to put aside

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Reference no: EM133559740

Financial Statement Analysis

College Fund Question

Alecia's daughter will start college in seven years. Currently, tuition at college costs $28,000 per year and is expected to increase at an annualized rate of 9%.

Karen will take four years to complete her degree.

Alecia can invest in an asset that will generate, on an annual basis, a return of 6%.

The entire year's tuition is payable at the beginning of each school year.

Find out how much Alecia will have to put aside each month, starting at the end of the month, in order to have sufficient funds when Karen starts college so that Karen can take that lump sum of money, pay tuition each year, (continue earning interest on the amount left over), and at the beginning of the fourth year have just enough money to pay the last year of tuition. Show and explain each step of your reasoning.

Reference no: EM133559740

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