Emil and Reba want to use a 529 plan to provide full undergraduate college funding for their 4-year-old son to go to college at age 18. The current cost of one year’s tuition/fees/room/board (just “tuition” going forward) is $35,000 in today’s dollars. Their 529 plan is a college savings plan that has no guarantees about the cost of tuition in the future. Calculate the amount they would have to deposit into their 529 plan each year (at the end of each year) to fund their son’s college education. Assume the following:
· their son will attend college for four years
· the education inflation rate is 3%
· their rate of return on their 529 account investments is 5%
· they won’t make any additional deposits into the 529 plan once their son starts college (meaning funds will go into the 529 plan for 14 years and then funds will come out of the 529 plan for four years).
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