Suppose that a young couple has just had a baby boy, and theywish to have enough saved to fund four years of college educationat a school like UCLA when their son is at the ages of 19-22.Suppose this year’s total expense of an undergraduate student atWashU, including tuition, room and board, books and supplies,amounts to $74,000. This annual cost is expected to grow at 3.5% ayear. To simplify the timeline, they assume that all the expenseswill be paid in full on their child’s birthdays while he is incollege, that is, his 19th to 22nd birthdays. The annual returnexpected on a college savings account is 8%. How much do they needas of today in order to fund their child’s college education?
