Question

Elias and mila want to invest $800 each month into a 529 plan for their seven-year-old son, stu. they expect stu to attend state university, where the current tuition is $25,000 per year. education inflation is expected to be 6.5% and the anticipated rate of return on their 529 plan is 8%. stu will attend school for four years, starting at age 18. based on these facts, will elias and mila's current investment plan with $800 monthly deposits meet their education savings goal?

A) Yes, it will exceed the goal by $111,554.49

B) No, it will fall short by $27,3224.36

C) No, it will fall short by $42,152.30

D) Yes, it will exceed the goal by $107,285.69

Answer 1

An evaluation of Elias and Mila's 529 plan contributions against the rising cost of college tuition with inflation must be made to determine if their savings will suffice for their son's education. Detailed calculations using future value formulas for an annuity and lump sums, considering the rate of inflation and investment return, are necessary to provide a precise answer.

Step-by-step explanation:

Elias and Mila's current investment plan with $800 monthly deposits into a 529 plan needs to be assessed to determine if it will meet their education savings goal for their son, Stu. Considering Stu will attend a state university at a current tuition of $25,000 a year with an education inflation rate of 6.5% and their 529 plan yields an 8% return, we have to calculate the future cost of college and the future value of their investments.

Using the formula for future value of an annuity, we can determine how much money Elias and Mila will have when Stu is ready for college. The future cost of college can be computed by applying the formula for the future value of a lump sum, considering the inflation rate.

However, with the provided information, a detailed calculation is required to precisely answer whether their savings plan will meet the goal, exceed it, or fall short. It's imperative to conduct a thorough financial evaluation based on the mentioned variables to arrive at the correct answer.