The parents want to calculate the cost of sending their newborn child to college. The child will attend four years of college at 18-21 years of age. The parents are planning to retire at the same time that the child goes off to college, so they want to have enough put aside by that time to provide for the child's education.
Current cost of tuition is $15,000 per year
- Tuition is expected to increase 5% annually
- The parents expect that they can earn 8% on investments
- How much will tuition cost each year the child is in college?
- How much needs to be accumulated by the time the child goes to college?
- If the parents want to fund the entire scheme immediately, how much would need to be deposited
- today?
- If instead, they want to put some money away each year until retirement, how much would need
- to be deposited each year?