Reference no: EM132439148

Problem: Kevin Hall is saving for his son's college tuition. His son is currently 11 years old and will begin college in seven years. Kevin has an index fund investment worth $5,090 that is earning 9.5 percent annually. Total expenses at the University of Maryland, where his son says he plans to go, currently total $12,400 per year, but are expected to grow at roughly 6 percent each year. Kevin plans to invest in a mutual fund that will earn 11 percent annually to make up the difference between the college expenses and his current savings. In total, Kevin will make seven equal investments with the first starting today and the last being made a year before his son begins college.

What will be the present value of the four years of college expenses at the time that Kevin's son starts college? Assume a discount rate of 5.5 percent. Assume that the tuition payments are made at the end of each year. (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)