3. Sam and Jenny Lee are planning their sons college education. Their son will start college in eight years. The current cost is $50,000 per year. The Lees factor in a 3% inflation rate each year. Their son plans to finish his college study in four years.

Questions:

a) Using time value of money concepts, calculate the Lees monetary target in the nearest dollar in the future. You need to provide answers in each of the four years for their sons four-year college expenses.

b) The Lees consider using zero coupon bonds to achieve their financial goal. The bond yields for government zero-coupon bonds are 8% with a term to maturity of eight to eleven years. Calculate the total number of zero coupon bond required and the amount of funds the Lees need to set aside today to achieve their financial goal.

Please show work!