Explore BrainMass

This is a financial management problem

1) I am saving for my two children. One child will enter college in 5 years, while the other child will enter college in 7 years. College costs are currently $10,000 per year and are expected to grow at a rate of 5 percent per year. All college costs are paid at the beginning of the year. I assume that each child will be in college for four years. I currently have $50,000 in an educational fund. I plan to contribute a fixed amount to the fund over each of the next 5 years. My first contribution will come at the end of this year, and my final contribution will come at the date when I make the first tuition payment for my oldest child. I expect to invest my contributions into various investments, which are expected to earn 8 percent per year. How much should I contribute each year in order to meet the expected cost of my children's education?

© BrainMass Inc. brainmass.com June 21, 2018, 4:42 am ad1c9bdddf

Solution Preview

We should calculate the present value of both children's tuitions at the beginning of year 6 (or end of year 5)
Then for the first child: Payment = 10000, number of periods=4, interest ...