Kim's daughter is about to start kindergarten in a private school. Currently, the tuition is $20,000 per year, payable at the start of the school year (t=0). Kim expects tuition increases, on average, 5% per year over the next 13 years (t=1 to t=13). This means that the private education has 14 years, and the last payment of tuition fee is due at the beginning of year 14 (t=13). Kim has a saving account which is dedicated to paying his daughter's tuition. How much money at least should the saving account have today (t=0) so that the 14-year tuition can be fully paid using money from the saving account only? Assume that Kim's daughter remains in this private school for the entire 14-year private education and that Kim's current annual interest rate is 6%.
Kim's daughter is about to start kindergarten in a private school. Currently, the tuition is $20,000 per year, payable at the start of the school year (t=0). Kim expects tuition increases, on average, 5% per year over the next 13 years (t=1 to t=13). This means that the private education has 14 years, and the last payment of tuition fee is due at the beginning of year 14 (t=13). Kim has a saving account which is dedicated to paying his daughter's tuition. How much money at least should the saving account have today (t=0) so that the 14-year tuition can be fully paid using money from the saving account only? Assume that Kim's daughter remains in this private school for the entire 14-year private education and that Kim's current annual interest rate is 6%.
Chapter3: Income Sources
Section: Chapter Questions
Problem 40P: Minnie owns a qualified annuity that cost 78,000. The annuity is to pay Minnie 650 per month for...
Related questions
Question
thank you, this question please
Transcribed Image Text:Kim's daughter is about to start kindergarten in a private school. Currently, the tuition is
$20,000 per year, payable at the start of the school year (t=0). Kim expects tuition increases,
on average, 5% per year over the next 13 years (t=1 to t=13). This means that the private
education has 14 years, and the last payment of tuition fee is due at the beginning of year 14
(t=13). Kim has a saving account which is dedicated to paying his daughter's tuition. How
much money at least should the saving account have today (t=0) so that the 14-year tuition can
be fully paid using money from the saving account only? Assume that Kim's daughter remains
in this private school for the entire 14-year private education and that Kim's current annual
interest rate is 6%.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.Recommended textbooks for you
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT
Excel Applications for Accounting Principles
Accounting
ISBN:
9781111581565
Author:
Gaylord N. Smith
Publisher:
Cengage Learning
EBK CONTEMPORARY FINANCIAL MANAGEMENT
Finance
ISBN:
9781337514835
Author:
MOYER
Publisher:
CENGAGE LEARNING - CONSIGNMENT