Assume that your parents wanted to have 170000 saved for col

Assume that your parents wanted to have $170,000 saved for college by your 18th birthday and they started saving on your first birthday. They saved the same amount on your birthday and earned 10.5% per year on their investments. A. How much would they have to save each year to reach their goal? B. If they think you will take five years instead of four to graduate to graduate and decide to have $210,000 saved just in case, how much more would they have to save each year to reach their new goal?

Solution

Solution.

Calculation of PMT

PVOA = PMT Times ( PVOA factore for n = 18, i = 10.5% )

170,000 = PMT times ( 7.78 ) ( PVOA factore for n = 18, i = 10.5% from PVA table

PMT = $170,000 / 7.78 = $21,850.89

ii.

PMT = $210,000 / 7.78 = $26,992.28.

PMT = $26,992.28.