You are going to construct a calculator that finds the amount needed to be saved every year until your student starts college based on the following information. When done your calculator should solve for the yearly savings needed based on the following inputs:
- ROR Expected (the expected rate of return on your investments)
- Education Inflation Rate (the expected inflation rate for college expenses)
- Wage Inflation Rate (the rate you expect your salary to grow)
- Years Until College Starts (self explanatory)
- Current Annual Cost of College (the current out of pocket estimate if college started now)
I have populated the 5 variables above with some sample data to make it easier to visualize while you build your calculator.
We are going to deploy some of the things we learned in the TVM module to figure out what SERIAL PAYMENT needs to be made each year if we want the payment to grow along with our salary(wages) and we want to start saving today (begin mode). We also want to have amassed all fundingneeded so that once college starts we no longer have to be putting aside anymore money.Using proper Excel equationentering techniques, populate the cells from C12 to C24 with the equationsneeded to find the correct answer.
1. Use the FV function to find the estimate for out of pocket expenses when college starts (cell C12)
2. In cells C13-C15 enter equations to find the out of pocket expected costs for years 2-4 of college
3. In cell C16 find the total amount we need at the start of college to fund all 4 years.Hint:it is NOT simply the sum of cells C12-C15.Remember we are earning a ROR on that invested money all through college.
4. Since we are dealing with SERIAL PAYMENTS we need to use the FV in TODAY's DOLLARS for the funding need. In cell C20 convert the FV to TODAY's DOLLARSby discounting it back with the PV equation.
5. We use the Wage Inflation rate for this type of PV calculation. Refer to Lecture 3 in Module 3 if you need arefresher on this topic.
6. When figuring the PMT on Serial Payments we use an IARR so calculate the IARR for this problem in cell C227. Solve for the PMT using the proper Excel function in cell C24
Hint: Leave all cell formatting alone. I have it set to display properly bydefault.use proper Excel referencingand equations for full points.ion4SZ