Question 1131691
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Realistically, the investment continues accruing interest after the child starts taking out $25,000 per year.  Furthermore, the problem seems to be about saving for college expenses; when the child starts taking money out of the investment, it is realistic that he takes the $25000 per year out at the beginning of each year of college.<br>
So we first need to calculate how much money needs to be in the investment in order to be able to make withdrawals of $25,000 at the beginning of each year for 4 years, if interest is 4% compounded annually.<br>
{{{25000((1-(1.04)^(-4))(1.04))/.04 = 94377.28}}}<br>
And now we need to calculate how much the parents should invest at the end of each year for 18 years to accumulate that amount, if again interest is 4% compounded annually.<br>
{{{94377.28 = x((1.04^18-1))/.04)}}}
{{{x = 3680.08}}}<br>
Answer: The parents need to make contributions of $3680.08 on their child's first 18 birthdays to provide $25,000 at the beginning of each of the child's next 4 years, presumably at college.