Thread: 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?

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?

Hi
yes that is correct, semesters are 6 months in length.

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.

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