The Turners have 10 years to save a lump-sum amount for their child’s college education. Today a four-year college education costs $75,000, and this is expected to increase by10%per year into the foreseeable future. a. If the Turners can earn 6% per year on a conservative investment in a highly rated taxfree municipal bond, how much money must they save each year for the next 10 years to afford to send their child to college? b. If a certain college will “freeze” the cost of education in 10 years for a lump-sum of current value $150,000, is this a good deal?
The Turners have 10 years to save a lump-sum amount for their child’s college education. Today a four-year college education costs $75,000, and this is expected to increase by10%per year into the foreseeable future. a. If the Turners can earn 6% per year on a conservative investment in a highly rated taxfree municipal bond, how much money must they save each year for the next 10 years to afford to send their child to college? b. If a certain college will “freeze” the cost of education in 10 years for a lump-sum of current value $150,000, is this a good deal?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The Turners have 10 years to save a lump-sum amount for their child’s college
education. Today a four-year college education costs $75,000, and this is expected to
increase by10%per year into the foreseeable future.
a. If the Turners can earn 6% per year on a conservative investment in a highly rated taxfree municipal bond, how much money must they save each year for the next 10 years to
afford to send their child to college?
b. If a certain college will “freeze” the cost of education in 10 years for a lump-sum of
current value $150,000, is this a good deal?
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