John and Jane were recently married and want to start saving for their dream home. They expect the house they want will cost approximately $275,000. They hope to be able to purchase the house for cash in 10 years.
Required
a. How much will John and Jane have to invest each year to purchase their dream home at the end of 10 years? Assume an interest rate of 9 percent.
b. John's parents want to give the couple a substantial wedding gift for the purchase of their future home. How much must John's parents give them now if they are to have desired amount of $275,000 in 12 years? Assume an interest rate of 9 percent.