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

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.

Solutions

Expert Solution

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

jeff jeffy answered 2 years ago
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