No Free Lunch: Economics for a Fallen World: Third Edition, Revised

Chapter Sixteen: Valuing the Future - Concepts in Capital & Finance 416 14. For the following present value calculation, find the missing values: 15. Jill and James are the proud parents of a new baby boy named Adam. They want to begin saving for college. How much money do they need to save annually for 20 years to have enough for college? Assume that current college costs $100,000 for four years, and that the expected rate of increase of college costs is 3% per year, and the interest rate they can get from savings accounts is 5%. ( Hint: first calculate the future value needed for college using Equation 1 in this chapter. Then use a financial calculator per Figure 16.8 to calculate the annual amount.) -25,000.00 -15,000 30,000 20,000 20,000 20,000 0 1 2 3 4 6% -25,000 ? ? = PV 16,792.39 ? 14,150.94