Calculate present value of the total cost of tuition

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Reference no: EM131817828

Suppose that the tuition this year at a local university was $3,000 per year. The governor has announced that tuition in real terms will remain constant for the next ten years (and you believe this). Tuition will increase at the only rate of inflation, which we forecast to be 7% per year. The nominal interest rate is expected to remain at 9% per year. You have two children. The older child will start at the local university next year. The younger will start at the local university in five years. Calculate the present value of the total cost of tuition for both children. Please assume 4 years tuition for each child.

Reference no: EM131817828

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