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Suppose that a young couple has just had their first baby,a daughter,and they wish to ensure that enough money will be available to pay for her college education.Currently,college tuition,books,fees,and other costs,average $12,500 per year.On average,tuition and other costs have historically increased at a rate of 4% per year.
-Assuming that costs continue to increase an average of 4% per year,tuition and other costs for one year for this student in 18 years when she enters college will be closest to:
A)$12,500.
B)$21,500.
C)$320,568.
D)$25,323.

Question

Quizplus · Accepted Answer

If we assume an annual increase of 4%, the cost of college education in 18 years will be:
$12,500 x 1.04^18 = $25,323. Therefore, the closest value is D: $25,323.

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