Linda is 10 years old. Her parents want to save for 4 years of college, starting at 18. Her parents want to deposit X today and on birthdays 11,12, …. 17. On birthdays 18, 19, 20, 21 they plan to take out $20,000 – the total cost of education. How much do her parents need to save each year? Assume the discount rate is 10%. Solve the following ways:Using trial and error, is the $4,000/per year enough?Using Goal Seek, solve for the annual deposit necessary to meet their financial goals.

Here, Withdrawal Amount in 18,19,20,21 birthdays is $20,000 Discount Rate is 10% Time to save is 7…

Answered: Linda is 10 years old. Her parents want…

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter14: Planning For Retirement

Section: Chapter Questions

Problem 2FPE

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Question

Linda is 10 years old. Her parents want to save for 4 years of college, starting at 18. Her parents want to deposit X today and on birthdays 11,12, …. 17. On birthdays 18, 19, 20, 21 they plan to take out $20,000 – the total cost of education. How much do her parents need to save each year? Assume the discount rate is 10%. Solve the following ways:

Using trial and error, is the $4,000/per year enough?
Using Goal Seek, solve for the annual deposit necessary to meet their financial goals.

Expert Solution