This is a relatively easy problem to solve. Since the daughter has 4 annual payments of $15,000 each, we simply find their PV using the standard TVM formula. One important thing to do is convert 9% from comp. monthly to annual compound, which comes to about 9.38%.
PV=$52,713.28. This is PV of her fund at the beginning of her college ed.
The formula used for this is this standard TVM formula:
PV=P{[1 + R]^N - 1.[1 + R]^-N} R^-1=PV OF $1 PER PERIOD.
Now, the above PV is 12 years from now. We have to find its PV as of today.
PV=$52,713.28[1+.09/12]^-144
PV=$17,973.48. This is the PV as of today. We now have to find the monthly payment required to give this PV for 15 years, or 15 x 12=180 months. For this, will use another standard TVM formula, which is this:
PMT=PV. R.{[1 + R]^N/ [1 + R]^N - 1}
PMT=$17,973.48 x 0.010142666
PMT=$182.30. This is the monthly deposit made by her parents.
