You have saved $120,000 for your child to attend college. If it is in an account earning an annual rate of 8%, how much can you take out in equal payments at the end of each of the next four years to pay for their education?

Cash Invested in the saving account will earn a return of 8% each year and this amount could be withdrawn by the me to pay for the education of child.

We will use following formula to calculate the annual payments

P = r ( PV ) / [ 1 - ( 1+ r )^-n ]

where

PV = amount of investment = $120,000

r = rate of return = 8%

n = number of period = 4 years

P = 8% ( 120,000 ) / [ 1 - ( 1 + 0.08 )^-4 ]

P = 36,230.5

You have saved​ $120,000 for your child to attend college. If it is in an account earning an annual rate of​ 8%, how much can you take out in equal payments at the end of each of the next four years to pay for their​ education?

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You have saved $120,000 for your child to attend college. If it is in an account earning an annual rate of 8%, how much can you take out in equal payments at the end of each of the next four years to pay for their education?