Kim's daughter is about to start kindergarten in a private school. Currently, the tuition is $20,000 per year, payable at the start of the school year (t=0). Kim expects tuition increases, on average, 5% per year over the next 13 years (t=1 to t=13). This means that the private education has 14 years, and the last payment of tuition fee is due at the beginning of year 14 (t=13). Kim has a saving account which is dedicated to paying his daughter's tuition. How much money at least should the saving account have today (t=0) so that the 14-year tuition can be fully paid using money from the saving account only? Assume that Kim's daughter remains in this private school for the entire 14-year private education and that Kim's current annual interest rate is 6%.

Kim's daughter is about to start kindergarten in a private school. Currently, the tuition is $20,000 per year, payable at the start of the school year (t=0). Kim expects tuition increases, on average, 5% per year over the next 13 years (t=1 to t=13). This means that the private education has 14 years, and the last payment of tuition fee is due at the beginning of year 14 (t=13). Kim has a saving account which is dedicated to paying his daughter's tuition. How much money at least should the saving account have today (t=0) so that the 14-year tuition can be fully paid using money from the saving account only? Assume that Kim's daughter remains in this private school for the entire 14-year private education and that Kim's current annual interest rate is 6%.

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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