You want to have $45000 to send a child to college in 10 years. Your bank...

You want to have $45000 to send a child to college in 10 years. Your bank offers a college savings account that pays an APR of 4.2% compounded monthly.

a. How much would you need to deposit monthly to reach your goal?

b. Write the first four lines of the amortization table for this investment.

Expert Solution

(a) We find the monthly deposit using 'PMT' function in excel

PMT = PMT(0.042/12,120,0,45000)

Here, Rate = 4.2% / 12 ( Since the rate is compounded monthly)

nper = 120 ( The number of periods = 10 years*12 months = 120)

PV = 0

FV= 45000

we get PMT = -$302.39

ie. $302.39 is to be deposited monthly to reach the goal

(b)

Month	Monthly deposit amount	Total balance in the account
1	302.39	302.39
2	302.39	605.838365
3	302.39	910.3487993
4	302.39	1215.92502
5	302.39	1522.570758
6	302.39	1830.289755
7	302.39	2139.085769
8	302.39	2448.96257
9	302.39	2759.923939
10	302.39	3071.973672
11	302.39	3385.11558
12	302.39	3699.353485
13	302.39	4014.691222
14	302.39	4331.132641
15	302.39	4648.681606
16	302.39	4967.341991
17	302.39	5287.117688
18	302.39	5608.0126
19	302.39	5930.030644
20	302.39	6253.175751
21	302.39	6577.451866
22	302.39	6902.862948
23	302.39	7229.412968
24	302.39	7557.105914
25	302.39	7885.945784
26	302.39	8215.936595
27	302.39	8547.082373
28	302.39	8879.387161
29	302.39	9212.855016
30	302.39	9547.490009
31	302.39	9883.296224
32	302.39	10220.27776
33	302.39	10558.43873
34	302.39	10897.78327
35	302.39	11238.31551
36	302.39	11580.03961
37	302.39	11922.95975
38	302.39	12267.08011
39	302.39	12612.40489
40	302.39	12958.93831
41	302.39	13306.68459
42	302.39	13655.64799
43	302.39	14005.83276
44	302.39	14357.24317
45	302.39	14709.88352
46	302.39	15063.75812
47	302.39	15418.87127
48	302.39	15775.22732
49	302.39	16132.83061
50	302.39	16491.68552
51	302.39	16851.79642
52	302.39	17213.16771
53	302.39	17575.80379
54	302.39	17939.70911
55	302.39	18304.88809
56	302.39	18671.3452
57	302.39	19039.08491
58	302.39	19408.1117
59	302.39	19778.43009
60	302.39	20150.0446
61	302.39	20522.95976
62	302.39	20897.18012
63	302.39	21272.71025
64	302.39	21649.55473
65	302.39	22027.71817
66	302.39	22407.20519
67	302.39	22788.0204
68	302.39	23170.16848
69	302.39	23553.65407
70	302.39	23938.48186
71	302.39	24324.65654
72	302.39	24712.18284
73	302.39	25101.06548
74	302.39	25491.30921
75	302.39	25882.91879
76	302.39	26275.89901
77	302.39	26670.25465
78	302.39	27065.99054
79	302.39	27463.11151
80	302.39	27861.6224
81	302.39	28261.52808
82	302.39	28662.83343
83	302.39	29065.54335
84	302.39	29469.66275
85	302.39	29875.19657
86	302.39	30282.14975
87	302.39	30690.52728
88	302.39	31100.33412
89	302.39	31511.57529
90	302.39	31924.25581
91	302.39	32338.3807
92	302.39	32753.95503
93	302.39	33170.98388
94	302.39	33589.47232
95	302.39	34009.42547
96	302.39	34430.84846
97	302.39	34853.74643
98	302.39	35278.12455
99	302.39	35703.98798
100	302.39	36131.34194
101	302.39	36560.19164
102	302.39	36990.54231
103	302.39	37422.39921
104	302.39	37855.7676
105	302.39	38290.65279
106	302.39	38727.06007
107	302.39	39164.99478
108	302.39	39604.46227
109	302.39	40045.46788
110	302.39	40488.01702
111	302.39	40932.11508
112	302.39	41377.76748
113	302.39	41824.97967
114	302.39	42273.7571
115	302.39	42724.10525
116	302.39	43176.02962
117	302.39	43629.53572
118	302.39	44084.6291
119	302.39	44541.3153
120	302.39	44999.5999

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