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    Fixed APR Payment Growth

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    This problem has to do with costs of tuition and housing for school. How it grows over a four year period. Making fixed APR payments.

    You are saving for your child's college costs. You child will start her first semester at Harvard in exactly 10 years. You expect her first year's costs (tuition, housing...) to be $40,000 and you expect those costs to climb by exactly 5% each year for the following 3 years. Tuition is due at the end of each year.

    a. Fill in the expected tuition costs for years 2-4.

    Year 10 Year 11 Year 12 Year 13

    a. If you plan to make 9 equally sized (or fixed) deposits into a college investment account at the end of each of the next 9 years (the first deposit one year from today), what will be your annual deposit if you expect the investment account to pay a 4.0 APR, compounded annually.
    b. How does your answer change if you already have $10,000 in the account?

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    Solution Summary

    The fixed APR payment growths are determined.