Savings; Saving For College Costs - HP 10BII Owner's Manual

Savings
Saving for College Costs
Suppose you start saving now to accommodate a future series of cash
outflows. An example of this is saving money for college. To determine
how much you need to save each period, you must know when you'll
need the money, how much you'll need, and at what interest rate you can
invest your deposits.
Example. Your oldest daughter will attend college in 12 years and you
are starting a fund for her education. She will need $15,000 at the
beginning of each year for four years. The fund earns 9% annual interest,
compounded monthly, and you plan to make monthly deposits, starting
at the end of the current month. The deposits cease when she begins
college. How much do you need to deposit each month?
This problem is solved in two steps. First calculate the amount you'll
need when she starts college. Start with an interest rate conversion
because of ће monthly compounding.
| $15,000 | | | VYR = 996
Keys: Display: Description:
Set to Begin mode. Press QE if BEGIN annunciator is not displayed.
CODD 12.00 Stores number of
compounding periods
used with this nominal
rate.
Qe 9.38 Calculates annual
effective rate.
108 8: Additional Examples