A father is planning a savings program to put his daughter through college. His

Question

A father is planning a savings program to put his daughter through college. His daughter is now 13 years old and he anticipates that he needs to save $ 92,672 for tuition, books and board when his daughter begins college. The daughter recently received $ 7,755 from her grandfather's estate which will also be used to help meet the cost of her education. Assume the father wishes to make 5 equal deposits to a money market account paying 8 percent interest compounded annually. He will make his first deposit one year from today and his last deposit the day she starts college. What will his annual deposits be?

How is this done on the calculator? Do you subtract the grandfathers money, then divide by 5 for payments?

Explanation / Answer

Sorry again for before


PV of college = 92,672 (P/F,i=8%,N=5) = 63,071.01

Money needed = 63,071.01 - 7,755 = 55,316.01

Annuity = P(A/P,i=8%,N=5) = 55,316.01 (0.2505) = 13,854.25

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