Can you please help answer the following. see attached file
Questions:
1. In the recent past, college fees had been increasing at about 8 percent per year. Because this rate of increase exceeded the general inflation rate, Paul and Nancy felt it would decline to a level closer to measures of general inflation, such as the Consumer's Price Index. Thus, they decided to assume that college fees would increase 6 percent per year. At this rate, how much will one year of college cost 18 years from this fall. In 18 yrs, present tuition of 18,000 per year, at an inflation rate of 6%, will be 51,378.
2. Assume the Murrays want to accumulate a fund equal to four times the first year's tuition by the end of year 18. Assume further that they make a single payment into this fund at the end of each year, including the 18th year. How much would they have to contribute to this fund each year, assuming that their investments earn 6 percent per year?
3. How would their annual contributions differ if their investments earned 8 percent? 10 percent? 4 percent?
To have 4 yrs tuition saved in 18 yrs, or 205,512, the annual payment at the end of each year, for 18 yrs, must be:
At 6% - 6,650. At 8% - 5,488 At 10% - 4,507 At 4% - 8,014