A married couple is trying to finance their three-year-old son's college education. Money can be deposited at 6% compounded quarterly. What end-of-quarter deposit must be made from the son's 3rd birthday to his 18th birthday to provide $ 60,000 on each birthday from the 18th to the 21st? (Note that the first deposit comes three months after his 3rd birthday and the last deposit is made on the date of the first withdrawal.)

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Business

Nelson White

30 October, 03:10

A married couple is trying to finance their three-year-old son's college education. Money can be deposited at 6% compounded quarterly. What end-of-quarter deposit must be made from the son's 3rd birthday to his 18th birthday to provide $ 60,000 on each birthday from the 18th to the 21st? (Note that the first deposit comes three months after his 3rd birthday and the last deposit is made on the date of the first withdrawal.)

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Ellis Clarke · Answer 1

21-18=3 years of payments

Quarterly payments so = 3*12 payments

N=12

I=6/4=1.5

FV=$60,000

PV=0

PMT=?

Use financial calculator to compute PMT

You will need to contribute $4,600.80 at the end of each period to reach the future value of $60,000.00.