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Leo is trying to decide if he should attend college or not. Part of his decision will be based on the return on investment of college. He estimates costs to attend Texas Tech for 4 years including room and board are $24,044 per year. He also assumes tuitions costs will rise by 6.5% per year. How much is a 4 year degree going to cost Leo?

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Answer:

Explanation:

Find the future value formula to calculate the cost of tuition in 4 years;

FV = PV (1+r)^n

PV= Invested amount in present value terms = 24,044

r= interest rate = 6.5% or 0.065

n = total duration = 4

Next, plug in the numbers in the formula;

FV = 24,044 (1+0.065)^4

= 24,044 * 1.28646635

= 30,931.7969

Therefore, in 4 years, it will cost Leo $30,931.80

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