Question

It is 2017. My 2-year old daughter wants to go to Harvard (a private U.S. university) starting in 2033 (in 16 years’ time). The tuition fee is estimated to be $250,000. How much do I need to put aside starting one month from today and at the end of every one month until I have $250,000 saved up to pay her tuition fees in 2033? Assume I can earn 1% interest per month in my investment account. Please round your answer to two decimal places.

	a.	$2,934.31
	b.	$6,555.22
	c.	$14,486.15
	d.	$434.31
	e.	$1,302.08

Answer 1

Future value of annuity ($250,000)	=	Amount*[{(1=+r)^n -1}/r]
		Time (n)	=	16years*12 months=192 months
		Monthly rate	=	1% or 0.01
		Future value	=	$250,000
		$250,000	=	Amount*[{(1+0.01)^192}-1]/0.01
		$250,000	=	Amount*[{(1.01)^192}-1]/0.01
		$250,000	=	Amount*[(6.7562-1)/0.01]
		$250,000	=	Amount*[5.7562/0.01]
		$250,000	=	Amount*575.622
	$250,000/$575.62	=	Amount
	$434.31	=	Amount
	monthly saving is $434.31
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