A couple with a newborn daughter wants to establish a college fund to pay for future college expenses. The couple can earn 12% compounding annually on their investments and estimate that future college costs will be $50,000 per year for four years. Assume that the daughter enters college at age 18 and that payments are made on each birthday. Also, assume that college costs must be paid at the beginning of the college year. What annual payment must be made to ensure that a sufficient amount has been saved to cover all costs when the daughter enters college? [Make sure to begin by drawing the correct cash-flow diagram.]

A couple with a newborn daughter wants to establish a college fund to pay for future college expenses. The couple can earn 12% compounding annually on their investments and estimate that future college costs will be $50,000 per year for four years. Assume that the daughter enters college at age 18 and that payments are made on each birthday. Also, assume that college costs must be paid at the beginning of the college year. What annual payment must be made to ensure that a sufficient amount has been saved to cover all costs when the daughter enters college? [Make sure to begin by drawing the correct cash-flow diagram.]

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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