Assume that you have $15,000 in a bank account that pays 5 percent annual interest. You plan to go back to school for a combination MBA/law degree 5 years from today. It will take you an additional 5 years to complete your graduate studies. You figure you will need a fixed income of $25,000 in today's dollars; that is you will need $25,000 of today's dollars during your first year and each subsequent year. (Therefore, your real income will decline while you are in school.) You will withdraw funds for your annual expenses at the beginning of each year. Inflation is expected to occur at the rate of 3 percent per year.

How much must you save during each of the next 5 years in order to achieve your goal? The first increment of savings will be deposited one year from today.