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?
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.