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Time Value of Money

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Michael is planning for his son's college education to begin ten years from today. He estimates the yearly tuition, books, and living expenses to be $10,000 per year for a four-year degree. How much must Michael deposit today, at an interest rate of 12 percent, for his son to be able to withdraw $10,000 per year for four years of college?

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Solution Summary

Calculates the present value for an annuity.

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Please see the answer in the attached file:
Note: the abbreviations have the following meanings

PVIF= Present Value Interest Factor
PVIFA (Annuity due)= Present Value Interest Factor for an Annuity due

They can be read from tables or calculated using the following equations
PVIF( n, r%)= =1/(1+r%)^n
PVIFA- Annuity due( n, r%)= =(1+r%) ...

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