You have two children who will be going to college. The first child will begin 17 years from today, and tuition will be $20,000, $21,000, $22,000 and $23,000 at t=17, 18, 19, and 20. The second will begin college 19 years from today, and tuition will be $22,000, $23,000, $24,000 and $25,000 at t=19, 20, 21, and 22.
a) To fund your children’s tuition, you would like to make an equal annual deposit over the next 20 years (first deposit at t=1, last at t=20) in an account earning 4% per year, compounded semi-annually. What equal amount must you deposit each year?
b) What if (instead of an equal annual deposit) to fund your children’s tuition you plan to make deposits over the next 20 years (first deposit at t=1, last at t= 20) that grow each year by 3%. If those deposits earn 4% per year, compounded semi-annually, what is the amount of the first deposit (at t=1)?
c) Good news! Your parents have offered to pay the entire college tuitions of your children. They plan to do this by making a single deposit 5 years from today (at t=5). If invested funds earns 4% per year, compounded semi-annually, what single amount should they deposit?
