Question 1011421
4. A client has asked for your advice on setting up two university education trust funds for his two children ages 4 and 6 respectively. He feels that an accumulated trust of $10,000 for each child on their 18th birthdays will be sufficient to provide a good education.

a) What amount must be placed in each trust account annually in advance to produce the desired trust, assuming that the deposits bear interest at 7% compounded annually?
<pre>Amount each year for 4 year-old: {{{highlight_green("$"443.45)}}} for 14 years 
Amount each year for 6 year-old: {{{highlight_green("$"559.02)}}} for 12 years

This is the formula I used. It's set up in MS Excel. It may seem like 2 different formulae, but they're the same. 
It's just that one is a little simpler, if I may say so.
{{{highlight_green(highlight(PMT = FV[oa]/(((1+i/m)^(mt)-1)/(i/m))))}}}, or {{{highlight_green(highlight(PMT = FV[oa]/(((1 + i/m)^(mt)- 1) * (m/i))))}}}, where:
{{{PMT}}}    =  ANNUAL deposit
{{{FV[oa]}}}   =  FUTURE VALUE of an ordinary annuity (end-of-period deposit)
{{{i}}}      =  ANNUAL INTEREST rate
{{{m}}}      =  NUMBER of COMPOUNDING periods, per annum
{{{t}}}      =  TIME (in years)