FINANCE 301 – The parents of a newborn daughter
The parents of a newborn daughter would like to set aside an amount today to cover her 4 years of college education. Tuition payments will begin exactly 18 years from today and will be paid for 4 consecutive years â on her 18thbirthday, her 19th birthday, and again on her 20th, and 21st birthdays. It is estimated that when she begins college the full cost of her education will be $45,000 per year. Assuming that her tuition payments stay at $45,000 per year over each of her four years of college, what dollar amount needs to be set aside today to cover all 4 years of tuition? Use an interest rate of 6%.
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