INTRO TO FINANCE.... I don't know what I'm doing wrong.........?

Question

Your parents start saving for your sister's college education. She will begin college when she turns age 18 and will need $4,000 at that time and at the end of each of the following 3 years. They will make a deposit at the end of this year in an account that pays 6% compounded annually, and an identical deposit at the end of each year with the last deposit occurring when she turns age 18. If an annual deposit of $1,484 will allow them to reach their goal. How old is your sister now?

I plugged these values in:
FV = 16,000
PMT = 1,484
I/YR = 6
PV = 0

I got 16.17 by plugging this in my financial calculator.
Then I did 18 - 16.17 = 1.83 years old.

I have no idea what I did wrong because the answer is supposed to be 10 ....

Please help me.. =(

Answer 1

This is NOT a single calculation. First use the present value of an annuity to find the amount needed at age 18. Then use the future value of an annuity to determine how many years are needed to reach that amount given the payments listed.

Answer 2

I think there is more involve here than you are accounting for. The future value is not $16,000. as you are removing $4000 at the beginning of year one - but still earning 6% on the remaining balance - which does not get touched till the END of the following year of college so there is 24 months of interest before that second payment is made - then 12 months till the end of the 3rd. and another 12 months till the final. I'm not familure with financial calculators - old school "adding machines" but you could get on Googles page and check out their financial sanarios - might help.