Suppose that a young couple has just had their first baby and they wish to ensure...

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Finance

Suppose that a young couple has just had their first baby andthey wish to ensure that enough money will be available to pay fortheir child's college education. Currently, college tuition, books,fees, and other costs, average $12,500 per year. On average,tuition and other costs have historically increased at a rate of 4%per year.
Assuming that college costs continue to increase an average of4% per year and that all her college savings are invested in anaccount paying 7% interest, then the amount of money she will needto have available at age 18 to pay for all four years of herundergraduate education is closest to:
A) $97,110
B) $107,532
C) $101,291
D) $50,000
E) None of the above

Answer & Explanation Solved by verified expert

4.4 Ratings (861 Votes)

Current Fees per year 12500 No of years of college 18years Growth rate tuition and other fees inflation 4 peryearCollege fees after 18 years or at age of 18 Current collegefees x 1 inflation18 12500 x 1418 12500 x 10418 12500 x 20258165 253227065 2532271 rounded See Answer

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