Solved: Saving for College The average annual undergraduate college tuition and fees

Chapter 6, Problem 51

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Saving for College The average annual undergraduate college tuition and fees nationally for 20092010 for public 4-year institutions totaled $7020. The College Board indicated that the inflation rate for tuition in 2009 was 6.5%. (a) Assuming that this inflation rate is constant for the next 17 years, determine the projected annual undergraduate college tuition and fees for public 4-year institutions for 20232024, 20242025, 20252026, and 20262027. (b) Determine a quarterly sinking fund payment, beginning with the fourth quarter of 2012, so that at the end of 2023, when the 45th payment is made, the sinking fund has a value equal to the sum of the projected costs of each of the 4 years. Assume the sinking fund earns interest at a 4.2% annual rate, compounded quarterly. Source: Trends in College Pricing 2009, College Board