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# The following two questions are based on this scenario: You want to...

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The following two questions are based on this scenario: You want to start a savings program for a college fund for your daughter. She is currently two years old (t=0) and will start college when she is 18 (t=16). Assume you are currently 30 years old. - College education currently costs \$90,000 per year at a private university like Northwestern, including room and board. . You expect your daughter will attend college for four years. . Assume the costs of a college education grow at a 10% rate per year. - You want to save the same amount each year starting next year, and your savings program will end when you daughter is 17, at t=15. . Assume that the market interest rate is 2%. You earn this interest on your savings. Hint: I recommend drawing the cash flow stream on paper or tracing out all cash flows in Excel. Problem 1. Question 1a. Based on the above. what are the expected costs of college education in year t=16? Problem 1, Question 1b. Based on the above, what are the expected costs of college education in year t=17? Problem 1, Question 1c. Based on the above, what are the expected costs of college education in year t=18? Problem 1. Question 1d. Based on the above. what are the expected costs of college education in year t=19?

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