Thelma is planning for her son's college education to begin five years from today.She estimates the yearly tuition,books,and living expenses to be $5,000 per year for a four-year degree,assuming the expenses incur only at the end of the year.How much must Thelma deposit today,at an interest rate of 8 percent,for her son to be able to withdraw $5,000 per year for four years of college?

Question

Quizplus · Accepted Answer

Thelma needs to calculate the present value of an annuity of $5,000 per year for four years at an 8% interest rate. The present value of this annuity is then discounted back five years to find the amount she needs to deposit today.

Thelma Is Planning for Her Son's College Education to Begin