Question

Please could you explain below by drawing timeline . and showing manual calculation using financial calculation. thank you

2. Assume that you are planning for for your child's college education. your child will begin college in 18 yrs . you would like to make annual deposits into an account, starting today, so that your child may make withdrawals in each of the years 18 through 21 for tuition. Annual tuition is currently $3000, but it is expected to grow at 5% a year for the next 25 years. if the effective interest rate is 9% annually, then how much must you deposits in the account each year? Assume that tuition is payable at the beginning of each school year.

Answer 1

Year	Annual Tution fee	Yearly Growth
1	3000	3%
2	3090
3	3183
4	3278
5	3377
6	3478
7	3582
8	3690
9	3800
10	3914
11	4032
12	4153
13	4277
14	4406
15	4538
16	4674
17	4814	Annuity Value as on 18th Year
18	4959	=Periodic Payment/(1+Interest)^0		4959
19	5107	=Periodic Payment/(1+Interest)^1		4686
20	5261	=Periodic Payment/(1+Interest)^2		4428
21	5418	=Periodic Payment/(1+Interest)^3		4184
22	5581	Annuity Value as on 18th Year		18256
23	5748
24	5921	Annuity Factor for 18 years with Interest 9.0%		45.018
25	6098
		Monthly Payment= Annuity Value/Annuity Factor
		406