A father is planning a savings program to put his daughter through university. His daughter is now 13 year old. She plans to enroll at the university in 5 years, and it should take her 4 years to complete her education. Currently, the cost per year (for everything her food, clothing, tuition, books, transportation, and so forth) is GH 20,000 per year but a 10 percent annual inflation rate in these costs is forecasted.

The daughter recently received GH 9000 from her grandfathers, estate; this money will be used to help meet the costs of the daughters education.

The rest of the costs will be met by money the father will deposit in a savings account that pays 15 percent interest per annum. He will make 5 equal deposits to the account, one deposit in each year from now until his daughter starts university. These deposits will begin today and will also earn 15 percent interest compounded annually.

• What will be the present value of the cost of 4 years of education at the time the daughter turns 18?

• What will be value of the GH 9000 that the daughter received from her grandfathers estate when she starts college at 18?
• If the father is planning to make the first of 5 deposits one year from now, how large must each deposit be for him to able to put his daughter through college?