Professor Kelly has just finished helping her two children pay for their university education. Susan, 22, and Randy, 25, have jobs and have left home. Kelly would like to help them a bit more, perhaps with their first home or some other expense in a few years, but she needs to plan some savings. She wants to be fair to each one, and she decides to give each one the same amount of money at age 30. She starts with $10,000 in savings now which she allocates to an account for Randy, since he reached age 30 first. She plans to give Randy $25000. She earns 5% on the savings before tax, and her marginal tax rate is 40%. The inflation rate is 2%.

a. How much will she need to save each year to have $25,000 to give to Randy?

b. If she is to be fair to Susan, how much would she give Susan when she reaches 30?

c. How much should she save per year, starting now to reach in (b) for Susan?

d. Kelly's mortgage will be paid off in five years. Until she then she can only put a total of $3000 p.a into the "kid fund". After that she can allocate as much as $20,000 p.a. How much will she have to save each year after the mortgage is repaid to reach her goal for Susan?