Answer to Question #4679 in Finance for Christine

Question

Chris 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. How much must Chris 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?

A. $11,277
B. $13,620
C. $20,000
D. $39,520

Answer 1

S = P (1 %)^n, 20000 = P 1.08^5, P = 20000/1.08^5 = 13620.
That's why the
correct answer is B: 13620