Future Value of Money
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You want to bank enough money to pay for 4 years of college at $20,000 per year for your child. The savings account will pay an effective rate of 5% per year. The first annual payment for tuition and for room and board is made on your child's 17th birthday. If you deposit the money on your child's 3rd birthday, how much must you deposit?
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Solution Summary
This solution calculates the amount of money to be deposited in order to pay for a college education in the future.
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There will be four payments: 14 years after the third birthday $20,000, 15 years after the third birthday $20,000, 16 years after the third birthday $20,000 and 17 years after the third birthday $20,000. The first payment is 14 years after the third birthday since ...
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