Nathan and Stephanie are saving for their daughter's college education. Their daughter, Paige, is now 8 years old and will be entering college 10 years from now (t= 10). College %3D tuition and expenses at State U. are currently $16,000 a year and are expected to increase at a rate of 4% a year. They expect Paige to graduate in 4 years (if Paige wants to go to graduate school, she's on her own). Tuition and other costs will be due at the beginning of each school year (at t = 10, 11, 12, and 13).

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2. Nathan and Stephanie are saving for their daughter's college education. Their daughter,
Paige, is now 8 years old and will be entering college 10 years from now (t = 10). College
%3D
tuition and expenses at State U. are currently $16,000 a year and are expected to increase
at a rate of 4% a year. They expect Paige to graduate in 4 years (if Paige wants to go to
graduate school, she's on her own). Tuition and other costs will be due at the beginning of
each school year (at t = 10, 11, 12, and 13).
So far, Nathan and Stephanie have built up $9,000 in the college savings account. Their
long-run financial plan is to contribute $3,000 a year at the beginning of each of the next
five years (at t = 0, 1, 2, 3, and 4). Then they plan to make 6 equal annual contributions at
the end of each of the following 6 years (t = 5, 6, 7, 8, 9, and 10). Their investment account
is expected to earn 8%. How large must the annual payments be in the subsequent 6 years
(t= 5, 6, 7, 8, 9, and 10) to meet their daughter's anticipated college costs?
Transcribed Image Text:2. Nathan and Stephanie are saving for their daughter's college education. Their daughter, Paige, is now 8 years old and will be entering college 10 years from now (t = 10). College %3D tuition and expenses at State U. are currently $16,000 a year and are expected to increase at a rate of 4% a year. They expect Paige to graduate in 4 years (if Paige wants to go to graduate school, she's on her own). Tuition and other costs will be due at the beginning of each school year (at t = 10, 11, 12, and 13). So far, Nathan and Stephanie have built up $9,000 in the college savings account. Their long-run financial plan is to contribute $3,000 a year at the beginning of each of the next five years (at t = 0, 1, 2, 3, and 4). Then they plan to make 6 equal annual contributions at the end of each of the following 6 years (t = 5, 6, 7, 8, 9, and 10). Their investment account is expected to earn 8%. How large must the annual payments be in the subsequent 6 years (t= 5, 6, 7, 8, 9, and 10) to meet their daughter's anticipated college costs?
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