Finance Assignment | Professional Writing
Rachel has a new-born daughter, Emma. She meets with her wealth manager at Fidelity to discuss a college fund for her daughter. The manager offers a plan that Rachel saves the same amount of money every year and then the fund will pay for Emma’s college education.
Rachel forecasts that Emma will go to a four-year college at age 20, and each year’s college will cost $45,000. If Rachel starts to save next year (at Emma’s age 1), and stops one year before Emma goes to college (at Emma’s age 19), and then the accumulated money in the fund will be exactly enough to pay for Emma’s four-year college education, how much would Rachel needs to save every year if Fidelity offers an interest rate of 10%? (Hint: draw a timeline of cash flows based on Emma’s age.)
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