The current cost of graduate school tuition is $15,464 peryear.The cost of tuition is...

The current cost of graduate school tuition is $15,464 per year.
The cost of tuition is rising at 7% per year.
You plan to attend graduate school for 3 years starting 3 years from now.

How much do you have to invest today if your savings account earns 2.81% APR compounded annually to just fund your tuition?

Expert Solution

Cost of first years of College (after 3 years) = 15464 * (0.07)^3 = 18944.064952

Cost of second years of College (after 4 years) = 15464 * (0.07)^4 = 20270.1494986

Cost of third years of College (after 5 years) = 15464 * (0.07)^5 = 21689.0599635

Present Value of all Value today = 18944.064952 / (1+0.0281)^3 + 20270.1494986 / (1+0.0281)^4 + 21689.0599635 / (1+0.0281)^5

= $54458.76

You need to deposit $54458.76 today.

jeff jeffy answered 2 years ago

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