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1. Assume the current (4) year cost to attend Park University for tuition and books is $12,500. It is estimated that these costs will grow at a 7% annual rate.

2. The money that you annual set aside to meet this financial obligation is expected to earn an estimated 5% annually for the 7-year period (period from age 10 to age 17).

Solve:

How much money has to be set aside annually to have the entire estimated 4 years college tuition and book costs by the time your child hits age 17.

Hint:

1st - Calculate the amount of money that will be need in 7 years that covers the estimated college costs for 4 years of college. You were given a base dollar amount that increases annually at a specific rate.

2nd - Use of the annuity table to calculate the amount of money that's required to be set aside each year to equal the total dollar amount calculated in NO. 1.