Bob wants to save for his daughters college tuition. MSU is offering a deal where you can buy one year worth of education today at todays prices ($26,249 per year) for use anytime in the future. His daughter expects to use this tuition in exactly 7 years. Bob also expects MSU's tuition to increase by 5% per year.

a. How much does Bob expect MSU tuition to be in 7 years?

b. Bob can also invest in education bonds that will earn 7% per year after tax. How much would he have to invest today to have the expected tuition in 7 years?

c. Which is better? Is there anything else you would have Bob consider?