How much will John Hedrick need to provide for his daughter’s college costs if he covers half of $20,000 tuition increasing at 8% annually?

How much will John Hedrick need to provide for his daughter’s college costs if he covers half of $20,000 tuition increasing at 8% annually?

• A. $18,509
• B. $27,371
• C. $37,019
• D. $74,037

Answer: (A)

To determine how much John Hedrick will need to save for his daughter's college costs, we need to consider the total tuition costs, which are projected to increase annually at a rate of 8%. The current tuition is $20,000, and John plans to cover half of this cost. Thus, his contribution is initially $10,000. However, the significant factor is that tuition will increase every year due to the 8% annual growth rate. To calculate the future value of the tuition at the time John will need to make the payment, we use the future value formula for a single sum: Future Value = Present Value × (1 + growth rate)^number of years. Assuming John’s daughter is starting college in 'n' years, the amount John will need to provide when the time comes to pay for college can be calculated for the future tuition costs. For example, if she starts college in 4 years: Future Tuition Cost = $20,000 × (1 + 0.08)^4. Future Tuition Cost = $20,000 × (1.36049) = $27,209.80. Since John is covering half of the tuition, his obligation would be: Half of Future Tuition Cost =

To determine how much John Hedrick will need to save for his daughter's college costs, we need to consider the total tuition costs, which are projected to increase annually at a rate of 8%.

The current tuition is $20,000, and John plans to cover half of this cost. Thus, his contribution is initially $10,000. However, the significant factor is that tuition will increase every year due to the 8% annual growth rate.

To calculate the future value of the tuition at the time John will need to make the payment, we use the future value formula for a single sum:

Future Value = Present Value × (1 + growth rate)^number of years.

Assuming John’s daughter is starting college in 'n' years, the amount John will need to provide when the time comes to pay for college can be calculated for the future tuition costs. For example, if she starts college in 4 years:

Future Tuition Cost = $20,000 × (1 + 0.08)^4.

Future Tuition Cost = $20,000 × (1.36049) = $27,209.80.

Since John is covering half of the tuition, his obligation would be:

Half of Future Tuition Cost =