15 years from now, your 2-year old son will be attending Harvard. You have determined he...

15 years from now, your 2-year old son will be attending Harvard. You have determined he will need $70,000 per year for tuition and living expenses. In 15 years, you will give him a lump sum payment for the entire amount he will need, assuming that he will be able to invest the money not yet needed at 5% interest. You have found an investment opportunity that will yield an annual return of 7% on your monthly payments. How much will you have to invest each month to give your son the money he needs for his education (assume his first year at Harvard is Year 0, and his final year is Year 3)?

Expert Solution

First let us calculate the lumpsum amount needed at t=15

So the lumsum amount needed at t=15 is $260,637.36. Now let us calculate monthly investment required for this amount.

From the above calculations, monthly investment needed is $822.26

jeff jeffy answered 1 year ago

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