your son ahs been accepted into college. This college guarantees that your son\'
ID: 2696675 • Letter: Y
Question
your son ahs been accepted into college. This college guarantees that your son's tuition will not increase for the 4 years he attends college. The first 11,500 tuition payment is due in 6 months. After that, the same payment is due every six months until you have made a total of eight payments. the college offers a bank account that allows you to withdraw money every six months and has a fixed APR of 10% (Semiannual) guaranteed to remain the same over the next 4 years.
How much money must you deposit today if you intend to make no further deposits and would like to mak elal the tuition payments from this account, leaving hte account empty when the last payment is made? THe amount that you need to deposit is ??
Explanation / Answer
As APR is given 10%(Semiannual)
It means APR of 6 month = 10%
THe amount that you need to deposit is = 11500 PVIFA(10%,8) =$61,351.65
If APR is to be 10% annually
Than APR of 6 month = 5%
THe amount that you need to deposit is = 11500 PVIFA(5%,8) =$74326.95
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