Your five-year-old daughter has just announced that she would like to attend college. The College Board has reported that the average annual cost of tuition, room, and board, and other expenses at public four-year colleges is $20,000 in 2022 (to be paid at the beginning of 2022). The cost has risen 3.5% over the last year. You feel this percentage increase is a good long-term estimate. You also believe that you can earn a rate of 7% compounded annually on investments to meet this goal.

A. If costs continue to rise 3.5% per year, how much will it cost for the first year of tuition in 13 years?

B. Assuming that you plan to have enough money saved in 13 years to cover all four years of college costs, how much will you need to accumulate by that time? Assume all annual costs are paid at the start of the school year.

C. Assume college costs triple. What is the new value for (B. above)?

D. If you were to invest a lump sum today in hopes of covering your daughter's college costs, how much would you have to invest? Assume you can only come up with 70% of this value. What is the maximum you can afford to spend on your daughter's four-year college education.

E. If you decided to invest annually, instead, how much would you have to invest each year?

F. You just learned of a $25,000 inheritance and plan to invest it in your daughter's college fund. Given this new source of funds, how much will you have to invest each year? You are also uncomfortable with the 7% investment outlook. Run the problem with 5% and 10%.