1. You are saving for your childs college education. Your child will start college in 16 years, and college tuition is due at the beginning of the year (i.e., the first tuition payment will occur at t=16). Average college tuition at a private school this year is $38,500 per year.

Scenario 1: Optimistic - tuition charges grow at the general inflation rate of 2.4266% per year.

1. Create a timeline that shows each of the four years worth of tuition
2. Calculate the present value, at t=16, of these payments if you assume that your opportunity cost of funds is 0.5% per month which compounds to 6.1678% per year.
3. Calculate the single payment you must make into the childs college account to pay for the entire college experience, if you make the payment now.
4. Calculate the monthly payment you must make into your childs college account to pay for four years of college; you may assume that the first payment into the college account comes in one months time and the last payment will come one month prior to the first college tuition payment.

Scenario 2: Pessimistic - tuition charges grow at the recent education inflation rate of 6.5911% per year.

Repeat the steps above with the pessimistic rate. If you have set up your approach well you can use your previous work (sometimes easiest to copy the entire tab you worked on) to just change the one assumption.