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Math Help - Annuity payments

  1. #1
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    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?
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  2. #2
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    Quote Originally Posted by smudge 76 View Post
    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?
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  3. #3
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    Hi
    yes that is correct, semesters are 6 months in length.
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  4. #4
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    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?

    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.
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  5. #5
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    Hi Mathceleb
    Thanks for your reply. The education policies are sold to parents with new babies so I'm assuming 0 years old.
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