Asked by Heyhi

In 4 years, your son will be entering college and you would like to help financially. You decide to create a college fund and make four annual deposits, starting now. In four years, you would like your son to be able to make four annual withdrawals of $7,500 from the fund (at the beginning of each year) that will cover his annual tuition. If the college fund earns 3.6% compounded annually, how much must you deposit at the beginning of each year? Assume tuition remains the same for the four years your son is attending college.
Answered by Reiny
Make a time graph, marking 'now', yr1, yr2, .... yr7
place x at now, yr1, yr2, yr3, 7500 at each of yr4, yr5, yr6, and yr7
Pick the end of yr3 as your focal point
At that point in time , the Amount of the deposits = Present Value of withdrawals

x( 1.036^4 - 1)/.036 = 7500(1 - 1.036^-4)/.035
x( 1.036^4 - 1) = 7500(1 - 1.036^-4)

tell me what you get?
Is your answer reasonable ?

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