Hello,
I am not sure if this is the right place to post this but I don't know what other subreddit to check. I am about to take my certification test to be a paraplanner and I am a little confused about financial planning calculations using a financial planning calculator (I use an HP 10bII+). Specifically, I am unsure how to calculate interest rate in order to find the present value of an investment.
One of the examples in my financial planning workshop asks for the present value of four years of tuition. This is the information provided:
4 years of tuition
Child was just born, and is going to start college at 18.
Tuition is currently $20,000 per year, increased at an annual rate of 4% per year.
Inflation has increased 2% per year
They can get an after-tax rate of return of 8%
This is the solution the problem provides:
PMT = 20,000
N = 4
I/YR = 3.8462 [(1.08+1.04) -1] x 100
PV = -72,861.8981
Where does the bolded number come from in the calculations? How do I find this number using a financial planning calculator (I use an HP 10bII+)?
If I am in the wrong subreddit to find this information out please guide me to the right one. Any help would be greatly appreciated! This test/class is for progressing in my job and I don't want to fail!
Submitted February 13, 2020 at 08:32PM by chickandmorty123 https://ift.tt/39Cs1Gd
