Discuss the forward rate and saving for college. See attached file for full problem description.© BrainMass Inc. brainmass.com October 9, 2019, 7:47 pm ad1c9bdddf
Please see the attached file.
Before we start, I think it helpful that we go over all the formulae that is needed in the computation:
Let FV = future value, PV = present value, N = number of periods (year, quarter, month...)
R = interest rate, PMT = payment per period
Here are the formulae that we need:
1. FV = PV * (1+R) ^ N
where " ^ " means to the power of.
For payments, we have FV = PMT*(1+R) + PMT*(1+R)^2 + ... + PMT*(1+R)^t + ... + PMT*(1+R)^N
where t = the t-th payment.
Then the sum of all the payments is, by using the results from the first question:
FV = PMT [(1+R)^N - 1] / R
Of course, you do ...
Assistance is given to compute the monthly payment.