Concerns: Youngs want to know the cost of college education for the two children so that they can approach Angel's father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don't know, they expect the S529 Plan's investment rate to be 8.5%. Step 1: Calculate the inflation-adjusted, six-year cost of each child's college education N = ÉV = PMT = PV= Step 2: Calcu the present value of the lump-sum cost of cach child's six years of college. For the 4 old For the 2 year old FV FV N PMT PV PMT PV Total PV of two children: Step 3: Calculate the payment needed to each child's 529 Plan For the 4 old For the 2 year old PV PV N FV FV PMT PMT %3D Total annual cost of savings: II I I I| II II I I II

Concerns: Youngs want to know the cost of college education for the two children so that they can approach Angel's father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don't know, they expect the S529 Plan's investment rate to be 8.5%. Step 1: Calculate the inflation-adjusted, six-year cost of each child's college education N = ÉV = PMT = PV= Step 2: Calcu the present value of the lump-sum cost of cach child's six years of college. For the 4 old For the 2 year old FV FV N PMT PV PMT PV Total PV of two children: Step 3: Calculate the payment needed to each child's 529 Plan For the 4 old For the 2 year old PV PV N FV FV PMT PMT %3D Total annual cost of savings: II I I I| II II I I II

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 37P

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Youngs want to know the cost of college education for the two children so that they can approach Angel’s father about fully funding 529 Plans. The current cost of education is $35,000 per year in today’s dollars and the inflation rate is expected to be 5%. They expect the children to be in school for 6 years each, and while they don’t know, they expect the 529 Plan’s investment rate to be 8.5%. Step 1: Calculate the inflation-adjusted, six-year cost of each child’s college education N = i = FV = PMT = PV= Step 2: Calculate the present value of the lump-sum cost of each child’s six years of college. For the 4 old For the 2 year old FV = FV = N = N = i = i = PMT = PMT = PV = PV = Total PV of two children: Step 3: Calculate the payment needed to each child’s 529 Plan For the 4 old For the 2 year old PV = PV = N = N = i = i = FV = FV = PMT = PMT = Total…
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