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Suppose that the parents of a young child decide to make annual deposits into a college savings account, with the first deposit being made on the child's fifth birthday, and the last deposit being made on the child's seventeenth birthday. It is assumed that withdrawals are made from the account, for the purposes of tuition and living expenses, as follows; each subsequent year is a 5% increase over the previous year:

Age 18 $12,000
Age 19 $12,600
Age 20 $13,230
Age 21 $13,891.50

If the interest rate throughout this entire period of time is 8%, what are the annual deposits in years five through seventeen?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M969274

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