SOLUTION: �If 4 years of college are expected to cost $150,000 18 years from now, how much must be deposited now into an account that will average 8% annually in order to save the $150,000?

Click here to see ALL problems on Money Word Problems

Question 761805: �If 4 years of college are expected to cost $150,000 18 years from now, how much must be deposited now into an account that will average 8% annually in order to save the $150,000? By how much would your answer change if you expected 11% annually?�
Answer by josmiceli(19441) (Show Source):
You can put this solution on YOUR website!
Let = amount deposited now
Let = the current savings
After 1st year,

---------------
After 2nd year,

----------------
After 3rd year,

----------------------
So, this is the general rule:

where = the number of years since initial deposit
given:

$37,537.35 needs to be deposited now
---------------------------------
Rate = 11%

$22,923.33 needs to be deposited now