Suppose you have three goals in your financial planning for saving money. First you would like to be able to retire in 25 years from now with a retirement income of $10,000 (todays dollars) per month for 20 years. Second, you would like to purchase a vacation home in Sedona in 10 years at an estimated cost of $500,000 (todays dollars). Third, assuming you will live until your life expectancy, say 20 years after your retirement, you would like to leave a cash contribution to your college in the amount of $1,000,000 (actual dollars) so that they dedicate a building in your name. You can afford to save $2,000 (actual dollars) per month for the next 10 years because you got a great job at an engineering firm. Assume that the general inflation rate is 4% compounded monthly and the property value in Sedona increases at an annual rate of 5% compounded monthly. Your first retirement withdrawal will be made 25 yearsand 1 month from now. Before retirement, you would be able to invest your money at an annual market interest rate of 10% compounded monthly. But after retirement, you will invest your assets in more conservative financial assets at an annual rate of 6% compounded monthly.

a) Calculate total amount you will need achieve your first goal (i.e. $10,000 (todays dollars) per month is how much in total at the end of 20 years, hint: this will be impacted by inflation and the market interest rate)?

b) What is the required savings in each month in years 11 through 25? Show your results with a sample calculation sheet and an MS Excel sheet.