Question

Your daughter will start college one year from today, at which time the first tuition payment of $ 58 , 000 $58,000 must be made. assume that tuition does not increase over time and that your daughter remains in school for four years. how much money do you need today in your savings account, earning 5 % 5% per annum, in order to make the tuition payments over the next four years, provided that you have to pay 35 % 35% per annum in taxes on any earnings (e.g., interest on the savings)? 1 point 214,309.02 205,665.13 204,762.90 115,822.98 31,435.65 316,407.89

Answer 1

To make the tuition payments over the next four years, you would need $55,238.10 in your savings account today. In this case, the future value is $58,000, the interest rate is 5%, and the number of periods is 1 year.

Step-by-step explanation:

To calculate the amount of money you need today in your savings account to make the tuition payments over the next four years, you can use the present value formula.

The formula is PV = FV / (1 + r)^n, where PV is the present value, FV is the future value, r is the interest rate, and n is the number of periods.

In this case, the future value is $58,000, the interest rate is 5%, and the number of periods is 1 year.

Plugging these values into the formula, the present value is $55,238.10.