# Annuity payments

• Aug 25th 2008, 11:13 PM
smudge 76
Annuity payments
Hi
A semester payment policy, that provides parents with six payments of \$10000 at the START of each semester after the child turns 18.
What payments must be made at the end of each quarter? Interest is charged at 8% compounded quarterly?
• Aug 26th 2008, 05:45 AM
mathceleb
Quote:

Originally Posted by smudge 76
Hi
A semester payment policy, that provides parents with six payments of \$10000 at the START of each semester after the child turns 18.
What payments must be made at the end of each quarter? Interest is charged at 8% compounded quarterly?

Can we assume semesters are 6 months in length?
• Aug 26th 2008, 01:01 PM
smudge 76
Hi
yes that is correct, semesters are 6 months in length.
• Aug 27th 2008, 06:19 AM
mathceleb
Originally Posted by smudge 76 http://www.mathhelpforum.com/math-he...s/viewpost.gif
Hi
A semester payment policy, that provides parents with six payments of \$10000 at the START of each semester after the child turns 18.
What payments must be made at the end of each quarter? Interest is charged at 8% compounded quarterly?

You need to first find the PV of 10k/semester for 6 semesters. If interest is compounded quarterly though, you need to figure out what it is on a semi-annual basis. After all the conversions, the PV of the 10k for 6 semesters becomese the Accumulated Value (AV) for the payments to be made at the end of each quarter. Your AV = your first PV, your interest is 2% per quarter.

How old is the child now? That will factor into your AV equation. That will be n.
• Aug 27th 2008, 12:27 PM
smudge 76
Hi Mathceleb
Thanks for your reply. The education policies are sold to parents with new babies so I'm assuming 0 years old.