Prestigious University is offering a new admission and tuition payment plan for all alumni. On the birth of a? child, parents can guarantee admission to Prestigious if they pay the first? year's tuition. The university will pay an annual rate of return of 4.5% on the deposited? tuition, and a full refund will be available if the child chooses another university. The tuition is expected to be $12,000 a year at Prestigious 18 years from now.
What would parents pay today if they just gave birth to a new baby and the child will attend college in 18 years?
How much is the required payment to secure admission for their child if the interest rate falls to 2.5%?