John and Daphne Are Saving for Their Daughter Ellen's College

Multiple Choice

John and Daphne are saving for their daughter Ellen's college education. Ellen just turned 10 (at t = 0) So far, John and Daphne have accumulated $15,000 in their college savings account (at t = 0) . Their long-run financial plan is to add an additional $5,000 in each of the next 4 years (at t = 1, 2, 3, and 4) . Then they plan to make 3 equal annual contributions in each of the following years, t = 5, 6, and 7. They expect their investment account to earn 9%. How large must the annual payments at t = 5, 6, and 7 be to cover Ellen's anticipated college costs?

A) $1,965.21
B) $2,068.64
C) $2,177.51
D) $2,292.12
E) $2,412.76