scorpio_gal17
Mar 13, 2008, 10:51 AM
You have just had your 30th birthday. You have two children. One will
go to college 10 years from now and require four yearly payments for
college expenses of $10000, $11000, $12000 and $13000. The second child
will go to college 15 years from now and require four yearly payments
for college expenses of $15000, $16000, $17000, and $18000. In addition,
you plan to retire in 30 years. You want to be able to withdraw $50000
per year from an account throughout your retirement. You expect to live
20 years beyond retirement. The first withdrawal will occur on your
61st birthday. All savings earn a 13% annual rate of return.
What equal, annual amount must you save for each of the next 30 years
in order to meet these goals?
I tried doing this question and my answer is around $8561. What i am not sure is how to find the present value for the four yearly payment for the college fee for both the children. I used the formula for uneven cash flow that means finding all the present value separately. Is that the correct way?
go to college 10 years from now and require four yearly payments for
college expenses of $10000, $11000, $12000 and $13000. The second child
will go to college 15 years from now and require four yearly payments
for college expenses of $15000, $16000, $17000, and $18000. In addition,
you plan to retire in 30 years. You want to be able to withdraw $50000
per year from an account throughout your retirement. You expect to live
20 years beyond retirement. The first withdrawal will occur on your
61st birthday. All savings earn a 13% annual rate of return.
What equal, annual amount must you save for each of the next 30 years
in order to meet these goals?
I tried doing this question and my answer is around $8561. What i am not sure is how to find the present value for the four yearly payment for the college fee for both the children. I used the formula for uneven cash flow that means finding all the present value separately. Is that the correct way?