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Michelle wishes to establish a university fund for her son who is currently 8 years old....

Michelle wishes to establish a university fund for her son who is currently 8 years old.

Required:

a. If her son will need a monthly income of $900, how much does he need to be in place at the start of his university life (ie start of first-year) so that the $900 per month is achievable? Assuming that the interest over the three years while her son is at university is 6%p.a. compounded monthly and he is paid the $900 at the start of the month for this present value annuity.

b.  Using your answer from part a, how much does Michelle need to invest now as a lump sum (present value) for the next 10 years at 5%pa (compounded annually) so that there are sufficient funds to achieve the amount from part a.      

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