Chapter 8 has several examples of Education Funding Plans using a financial calculator. All of these calculations can be done in excel also as explained in the lecture. You will complete several of the calculations from Ch. 8 in excel instead of using a financial calculator. There are multiple methods of doing this one of which is explored in the lecture for example if I wanted to know how much my bank balance of $100 would grow to after 1 year at 10% I would type =fv(10%,1,0,-100) in a cell and hit enter. Recalculate the folllowing examples in Excel:
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Next use the account balance method to solve the following problems:
Alex is saving for his son’s education. Alex’s son will be going to college in 15 years. College expenses are $11,000 in today’s dollars. College tuition is expected to rise by 3.1% per year. Alex assumes he will earn an after tax rate of return of 7.1% How much should Alex save at the end of each year if he will stop saving the year Alex goes to college? You can use the shortcut to the fisher equation for this problem.
How much will Alex have to save if he started saving at the beginning of the year?
Anita is saving for her daughter’s college costs. Anita’s daughter will be going to college in 16 yearrs. College expenses are currently $14,000. College tuitin is expected to rise by 3.5% per year. Anita assumes she willl earn 7% after taxes on her investments. How much should Anita save each month if she will start saving at the end of the month and stop saving once her daughter starts college? You can use the shortcut to the fisher equation for this problem.
How much will Anita have to put away today to fully fund her daughter’s college in 16 years?
