Q. A couple wants to save for their daughter’s college expense. The daughter will enter college 8 years from now and she will need
$40,000, $41,000, $42,000 and $43,000 in actual dollars for 4 school years. Assume that these college payments will be made at the beginning of the school year. The future general inflation rate is estimated to be 6% per year and the annual inflation-free interest rate is 5%. What is the equal amount, in actual dollars, the couple must
save each year until their daughter goes to college (for 8 years)?