Problem
You are saving for the university education of your two children. They are two years apart in age; one will begin university 15 years from today and the other will begin 17 years from today. You estimate your children's university expenses to be $45,000 per year per child, payable at the beginning of each school year. The annual interest rate is 7.5 percent. Your deposits begin one year from today. You will make your last deposit when your older child enters university. Assume four years of university.
I. How much money must you deposit in an account each year to fund your children's education?
II. Compute the future value of $2,500 continuously compounded for:
i. 5 years at a stated annual interest rate of 8 percent.
ii. 6 years at a stated annual interest rate of 5 percent.
iii. 8 years at a stated annual interest rate of 6 percent.
iv. 6 years at a stated annual interest rate of 11 percent.