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What is the estimated total future costs

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1. Tuition at the Home State University, a 4-year college, is currently $10,000 per year. Inflation rate for tuition is 6% per year and the after-tax annual investment return is 8%. The child is 8 years old and will attend the Home State University at age 18. The parents have not saved anything for their child's education.

a) What is the estimated total future costs (tuitions for 4 years)?

b) What is the current funding shortfall (additional lump-sum funding required)?

c) How much must the parents save at the end of each year if they start to save today?

Note: Please show the solutions to this question using the financial calculator/formulae and provide your answer in detail as I did in the slides.

2. Kelly wants to plan for her daughter's education. Her daughter, Rachel is 5 years old today will go to college at age 18 for 4 years. Current tuition cost is $20,000 per year. She has saved $7,000 for this goal. Kelly anticipates inflation rate for tuition is 8% and believes she can earn an 11% return on her investments.

a) What is the estimated total future costs (tuitions for 4 years)?

b) What is the current funding shortfall (additional lump-sum funding required)?

c) How much must Kelly save at the end of each month if she starts to save today?

Reference no: EM132403088

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