A couple wishes to establish a college fund at a bank for their five-year-old child. The college fund will earn an 8% interest compounded quarterly. Assuming that the child enters college at age 18, the couple estimates that an amount of $30,000 per year. in terms of today's dollars (dollars at child's age of five), will be required to support the child's college expenses for four years. College expenses are estimated to increase at an annual rate of 6%. Determine the equal quarterly deposits the couple must make until they send their child to college. Assume that the first deposit will be made at the end of the first quarter and that deposits will continue until the child reaches age 17. The child will enter college at age 18, and the annual college expense will be paid at the beginning of each college year. In other words, the first withdrawal will be made when the child is 18.
A couple wishes to establish a college fund at a bank for their five-year-old child. The college fund will earn an 8% interest compounded quarterly. Assuming that the child enters college at age 18, the couple estimates that an amount of $30,000 per year. in terms of today's dollars (dollars at child's age of five), will be required to support the child's college expenses for four years. College expenses are estimated to increase at an annual rate of 6%. Determine the equal quarterly deposits the couple must make until they send their child to college. Assume that the first deposit will be made at the end of the first quarter and that deposits will continue until the child reaches age 17. The child will enter college at age 18, and the annual college expense will be paid at the beginning of each college year. In other words, the first withdrawal will be made when the child is 18.
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