Answer:
The couple must save $ 6,598 each year
Explanation:
Calculating the payment amount:
Cost per year = $25,000 per each child
Cost for 4 years = $25,000 × 4 = $100,000
For the oldest child, the college will begin in 16 years and the second child the college will begin in 18 years.
Calculating the amount to be deposited each year for the oldest child.
Using Microsoft Excel PMT function
Rate = 8%
N = 16
PV = 0
FV = -100000
= $3,298
Therefore, they must deposit $3,298 each year for their oldest child.
Calculating the amount to be deposited each year for the second child:
Using Microsoft Excel PMT function
Rate = 8%
N = 18
PV = 0
FV = -100000
= $2,670
Therefore, they must deposit $2,670 each year for their second child.
Total sum to be saved per year = $3,298 + $2,670 = $6,598
