Jane Smith wants to send her son Billy to college. Billy justturned 3 years-old today, September
1st, and should enter college on his 18th birthday. After doingsome research, Jane finds out that
the tuition cost today for a year of study in a good universityin the US is about $50,000 payable
at the beginning of the academic year (September 1st of eachacademic year). It takes, on average,
4 years to obtain a bachelorâs degree. In addition, collegecosts typically increase by 5% per year.
How much will Jane have to pay in total for Billyâs collegeeducation? In other words, what is the
total amount of dollars that Jane will have paid in tuitioncosts, once Billy has graduated from
college? Round your final answer to the nearest dollar.
Jane opens a college savings account on Billyâs 3rd birthday,which promises her an effective
annual rate of return (EAR) of 8%. This account, which workslike an ordinary annuity, requires
her to invest the same fixed amount at the end of each month,until the beginning of Billyâs last
academic year, when she is expected to make the last of her 4tuition payments.
What is the monthly periodic interest rate that corresponds toan 8% EAR?
If she makes her first investment in Billâs college savingsaccount at the end of this month, what
is the fixed dollar amount (round the amount to 2 decimals) thatshe must invest each month in
order to pay for Billyâs college? (Remember that this savingsaccount requires her to make the
same dollar investment each month, starting from the end of thismonth until the beginning day,
September 1st, of his last academic year of college.)
Jane Smith wants to send her son Billy to college. Billy justturned 3 years-old today, September
1st, and should enter college on his 18th birthday. After doingsome research, Jane finds out that
the tuition cost today for a year of study in a good universityin the US is about $50,000 payable
at the beginning of the academic year (September 1st of eachacademic year). It takes, on average,
4 years to obtain a bachelorâs degree. In addition, collegecosts typically increase by 5% per year.
How much will Jane have to pay in total for Billyâs collegeeducation? In other words, what is the
total amount of dollars that Jane will have paid in tuitioncosts, once Billy has graduated from
college? Round your final answer to the nearest dollar.
Jane opens a college savings account on Billyâs 3rd birthday,which promises her an effective
annual rate of return (EAR) of 8%. This account, which workslike an ordinary annuity, requires
her to invest the same fixed amount at the end of each month,until the beginning of Billyâs last
academic year, when she is expected to make the last of her 4tuition payments.
What is the monthly periodic interest rate that corresponds toan 8% EAR?
If she makes her first investment in Billâs college savingsaccount at the end of this month, what
is the fixed dollar amount (round the amount to 2 decimals) thatshe must invest each month in
order to pay for Billyâs college? (Remember that this savingsaccount requires her to make the
same dollar investment each month, starting from the end of thismonth until the beginning day,
September 1st, of his last academic year of college.)
