Your clients, Jamal and Chyna Gwynn, would like you to determine if they are on track to meet the education funding objective of their son Jarius. Jarius is currently 13 years of age. Jamal and Chyna have high hopes for Jariuss future education. Use the following data to determine whether or not Jamal and Chyna need to save more to fund Jariuss educational need.

Combined federal and state marginal tax bracket: 29 percent

After-tax rate of return before college: 7.90 percent

Before-tax rate of return of 529 plan: 9.75 percent

Rate of return on educational assets after college begins: 5 percent

College expense inflation rate: 4 percent

Year Jarius begins college: Age eighteen

Number of years in college: four years

Yearly cost of college today: $60,000

After-tax assets earmarked for Jariuss education: $25,000

529 plan assets earmarked for Jariuss education: $60,000

After-tax educational annual savings: $0

Annual tax-advantaged educational savings: $18,000

Annual education savings growth rate: 3 percent

a.Approximately how much will Jamal and Chyna need (gross need) on Jariuss first day of college?

b.After accounting for the future value of assets and savings, how much additional (if any) do Jamal and Chyna need on Jariuss first day of college?

c.Based on your answer to the question above, how much must Jamal and Chyna save annually in the 529 plan to meet the educational saving goal?

d.If instead, Jamal and Chyna decide to save outside of a 529 plan or other tax-advantaged plan, how much must they save each year?