Question

Gary's parents want him to attend The University of Houston. They opened a college savings account 15 years ago. Today, average yearly tuition and fees for one year at the university are about $10,350. Based on this information, about how much should Gary's parents have saved each of the 15 years to cover the cost of 4 years at The University of Houston?

Answer 1

Results are below.

Explanation:

Giving the following information:

Today, average yearly tuition and fees for one year at the university are about $10,350.

I will assume a yearly interest rate of 8%.

First, we need to calculate the total amount needed:

Future value (FV)= 10,350*4= $41,400

Now, using the following formula, the annual deposit required:

FV= {A*[(1+i)^n-1]}/i

A= annual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= (41,400*0.08) / [(1.08^15) - 1]

A= $7,194.22