Suppose you want to save to pay the school of your children when they enter university. The fee are €30,000. You save €15,000 and invest them at the interest rate of 8% during 10 years. The future value of an amount in ten years is given by the formula For example, the future value of the €10,000 in ten years if the interest rate is 5% is equal to that is €16,289. a. Suppose inflation is zero, will the amount saved enough to cover the cost? b. Suppose now that the inflation is 5% during the ten years and that increase accordingly the university fee. Will your saving be enough then? c. Approximate how much must you save to equal the amount needed with inflation?
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