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Mr. Millers third question is with regards to his daughter Kates education. Kate is 8 years old today. She will be in college when she turns eighteen, that is, ten years from today. By that time, Mr. Miller must have retired too.

Since the Millers are considering relocating to the west coast, Kate will pursue higher education somewhere close by. Her college costs for the four consecutive years are estimated to be $36,000, $37,000, $38,000, $39,000 payable at the beginning of each school year. Mr. Miller wants your assistance in planning for Kates education. You are excited about a sizeable deposit account to be started under your management. Mr. Miller is agreeable to formally start a savings plan today. He is willing to save a certain sum of money on an annual basis until Kate is ready to start her college education.

You have one final question for Mr. Miller. You ask, Do you wish to continue your contributions even after Kate begins school? He replies, No! I consider retiring when she begins college education and I can contribute only during my active employment. Ignore a few days difference, if any, between the dates of savings plan and the start of school year. Ignore personal income tax. The Millers have the ability to save at 9% per annum through your bank.

1. How much should the Millers save each year to facilitate Kates education?

2. If the Millers desire to save for the same purpose on a monthly basis, how much should they save each month to facilitate Kates education?

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