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Sagot :
Answer:
$6,106.39
Explanation:
first we must find out the daughter's total university expenses:
college expenses in 5 years = $12,500 x (1 + 5%)⁵ = $15,953.92
we must find the present value of the college costs:
PV = $15,953.92 + [$15,953.92 x 2.7232 (PV annuity factor, 5%, 3 periods)] = $59,399.63
since the daughter already has $7,500, she will deposit that money and will have $7,500 x (1 + 8%)⁵ = $11,019.96 in 5 years, that means that she is $48,379.67
we now have our future value, the interest rate and the number of periods, we are missing the annuity due contributions:
FV = annual contribution x FV annuity due factor
$48,379.67 = annual contribution x 7.9228 (FV annuity due factor, 8%, 6 periods)
annual contribution = $48,379.67 / 7.9228 = $6,106.39
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