Amy is 12 years old now and will attend college at age 18. Her parents plan to fund her college for four years. College costs $20,000 per year as of the time when Amy turns to age 18. If her parents have saved $10,000 for this goal. Assume they can invest for 10% per year and tuition increases by 3.5% per year compounding annually.
A. What’s PV of Amy’s college cost as of the time when Amy turns to age 18? (Hint: college cost happens at the beginning of each year.)
B. What's the future value of what Amy's parents currently saved to the time when Amy turns to age 18?
C. How much more do Amy's parents need to save at the end of each month from now to Amy turns to age 18 in order to be able to fully fund her four-year college (assume a level payment) (Hint: use 10% as the rate of return)?