Frank Chang is planning for the day when his child, Laura, will go to college. Laura has just turned eight and plans to enter college on her 18th birthday. She will need $25,000 at the beginning of each year in school. Frank plans to give Laura a Mercedes-Benz as a combination graduation and 22nd birthday present. The Mercedes is expected to cost $55,000. Frank currently has $10,000 saved for Laura.
Also, Frank expects to inherit $25,000 nine years from now that will be used for Laura's education. Frank expects to be able to earn 7 percent after tax on any investments.
How much must Frank save at the end of each of the next 10 years in order to provide for Laura's education and the Mercedes?