Recently, you just became a parent, and you now want to begin saving for your child’s college education (which will start in 18 years). Currently, college tuition costs $22,000 per year, and it is expected to grow by 4% per year over the next 18 years. You expect to earn 5% on any savings that you keep. A. How much will tuition be the first year that your child starts college (18 years from today)? B. Assume that the tuition payment found in part A. remains the same for all four years of college, and that you would like to gift the exact amount of 4 year tuition to your child on his/her first day of college. If you make annual deposits into your savings account starting today (a total of 18 payments), how much must each payment be such that you have enough savings to pay for your child’s four-year college education upon admission?

    A.Schooling fees 18 years from today = 22,000(1+0.04)18‑

    = $44,567.96

    B. Total schooling fees of 4 years = 44,567.96*4 = $178,271.84

    Total sum of liquidations = 18

    Let the annual liquidation be x

    (1+r)*x[{(1+r)18 – 1}/r] = 178,271.84

    (1+0.05)*x[{(1+0.05)18 – 1}/0.05] = 178,271.84

    29.539x = 178,271.84

    X = $6,035.13

    Hence, annual liquidations achieve be $6,035.13