Donald Martin is saving for his son's college tuition. His son is currently 11 years old and will begin college in seven years. Donald has an index fund investment worth $7,550 that is earning 9.5 percent annually. Total expenses at the University of Maryland, where his son says he plans to go, currently total $14,700 per year, but are expected to grow at roughly 6 percent each year. Donald plans to invest in a mutual fund that will earn 11 percent annually to make up the difference between the college expenses and his current savings. In total, Donald will make seven equal investments with the first starting today and the last being made a year before his son begins college.

(a) What will be the present value of the four years of college expenses at the time that Donalds son starts college? Assume a discount rate of 5.5 percent. Assume that the tuition payments are made at the end of each year. (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)

Present value of tuition costs $___________

(b) What will be the value of the index mutual fund when his son just starts college? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)

Future value of investment $____________

(c) What is the amount that Donald will have to have saved when his son turns 18 if Donald plans to cover all of his sons college expenses? (Round answer to 2 decimal places, e.g. 15.25. Do not round factor values.)

Target saving $_____________

(d) How much will Donald have to invest every year in order to have enough funds to cover all his sons expenses? (Round factor values to 4 decimal places, e.g. 1.5212 and final answer to 2 decimal places, e.g. 15.25. Do not round factor values.)

Annual savings $_______________________