College Funding Problems Set 3
Show your work and underline your answers
1- John and Marie want to save some money for their daughter Ali’s education. Tuition costs $15,000 per year in today’s dollars. Ali is 7 years old and will go to school starting at age 18. She will go to school for 4 years. They can earn 8.5% on their investments and tuition inflation is 6%. How much must they save at the end of each year, if they want to make their last savings payment at the beginning of their son’s first year of college? (Use the 3 methods: Uneven cash flow, traditional, account balance).
2- Carlos and Janet are planning to save for their daughter Kailey’s college education. Kailey was born today and will attend college for 5 years, starting at age 18. Tuition currently costs $21,000 per year and tuition inflation is expected to be 5%. They believe they can earn 9% on their investments. How much must they save at the end of each year, if they want to make their last savings payment at the beginning of Kailey’s first year of college? (Use uneven cash flow and traditional).