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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 Preview

    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%) ...

    Solution Summary

    Calculates the present value for an annuity.