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You are saving for your child's college education. You plan on making a total of six...

You are saving for your child's college education. You plan on making a total of six tuition payments each one-year apart (college plus a masters program). The annual estimated tuition payment will be made 14-years from today (at t=14), and you estimate that payment will be $50,000. The remaining five-payments will be made from t=15 to t=19. You decide to make 15 yearly contributions into an investment account. The first contribution is made today (t=0) and your last contribution will be at t=14 (the same time you make your first tuition payment), you expect your investment account will earn 8% per year. Under this plan how much will you contribute annually?

i. Write down the discounted cash flow equation.

ii. Solve the equation to find the annual contribution amount.

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Expert Solution


jeff jeffy answered 2 years ago
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