Find the total present value of those costs

Reference no: EM13298480

A father is now planning a savings program to put his daughter through college. She is 13, she plans to enroll at the university in 5 years, and she should graduate in 4 years. Currently, the annual cost (for everything -food, clothing, tuition, books, transportation, and so forth) is $15,000, but these costs are expected to increase by 5% annually. The college requires that this amount be paid at the start of the year. She now has $7,500 in a college savings account that pays 6% annually. The father will make 6 equal annual deposits into her account; the first deposit today and sixth on the day she starts college. How large must each of the 6 payments be?

(Hint: Calculate the cost (inflated at 5%) for each year of college, then find the total present value of those costs, discounted at 6%, as of the day she enters college. Then find the compounded value of her initial $7,500 on that same day. The difference between the PV costs and the amount that would be in the savings account must be made up by the father's deposits, so find the 6 equal payments (starting immediately) that will compound to the required amount.)

Reference no: EM13298480

Questions Cloud

What is the annual interest paid on the bonds : Explain in detail if the bonds will be given out atpremium/discount and what is the annual interest paid on the bonds

Find the speed of the ball in orbit : You have a ball on a wire that is twirled in a circular orbit with a radius of 3.3 m, What is the speed of the ball in orbit

What is the relevant cost of new preffered stock : Investment bankers haave advised General Bill that flotation costs on the new preferred issue would be 5% of the selling price. The General's marginal tax rate is 30%. What is the relevant cost of new preffered stock?

State industrial preparation of organic phosphorus compounds : Phosphorus pentachloride is used in the industrial preparation of organic phosphorus compounds. Equation 1 shows its preparation from PCl3 and Cl2. (1) PCl3(l) + Cl2(g) PCl5(s) Use equations 2 and 3 to calculate H°rxn of equation 1

Find the total present value of those costs : The difference between the PV costs and the amount that would be in the savings account must be made up by the father's deposits, so find the 6 equal payments (starting immediately) that will compound to the required amount.)

Determine how long must the engines be fired : As a space craft approaches a planet, the rocket engines on it are fired to slow it down so it will go into orbit around the planet. how long must the engines be fired

Effect of hosting the basketball game : Effect of hosting the basketball game and effect of sale of season tickets

Computing the heat of reaction from heats of formation : Calculating the Heat of Reaction from Heats of formation Use the following information to find ^Hf of methanol [CH3OH(l)]. CH3OH(l) + 3/2 O2(g) CO2(g) + 2 H2O(g) (heat)H°

What is the speed of the entangled mass : An 1590 kg car stopped at a traffic light is struck from the rear by a 873 kg car and the two become entangled. what is the speed of the entangled mass after the collision

User Account

All Pages