Tom and Mary James just had a baby.They heard that the cost of providing a college education for this baby will be $100,000 in 18 years.Tom normally receives a Christmas bonus of $4,000 every year in the paycheck prior to Christmas.He read that a good stock mutual fund should pay him an average of 10 percent per year.Tom and Mary want to make sure their son has $100,000 for college.Consider each of the following questions.

a.How much does Tom have to invest in this mutual fund at the end of each year to have $100,000 in 18 years?

b.Tom's father said he would provide for his grandson's education.He puts $10,000 in a government bond that pays 3 percent interest.His dad said this should be enough.Do you agree?

c.If Mary has a savings account worth $50,000, how much must she withdraw from savings and set aside in this mutual fund to have the $100,000 for her son's education in 18 years?