John met his insurance agent to discuss the purchase of an insurance plan to fund his 8- year-old daughter’s university education in 11 years’ time. The payout from the insurance company is as follows: • Receive $30,000 at the beginning of each year for 4 years with the first receipt starting 11 years from today. The insurance company had 3 payment proposals:

Proposal 1: • Pay $35,000 today.

Proposal 2: • Beginning 2 years from today, pay $8,000 each year for the next 8 years.

Proposal 3: • Beginning 2 years from today, make payments each year for the next 8 years. • The first payment is $7,000 and the amount increases by 5% each year.

(a) Calculate the present value of each proposal. Use a 10% discount rate

(b) Which proposal should John choose? Explain

(c) If the discount rate is not given to you, what would be an appropriate discount rate to use?