To pay for your child\'s college education, you wish to have an accumulated $32,

Question

To pay for your child's college education, you wish to have an accumulated $32,000 at the end of 10 years.

a. To do this you plan on depositing an equal amount into the bank at the end of each mont. If the bank is willing to pay an annual rate of 3 percent, ho wmuch must you deposit each month to obtain your goal?

b. To do this you plan on depositing an equal amount into the bank at teh end of each two-week period. If the bank is willing to pay an anuual rate of 3 percent, how much must you deposit every two weeks to obtain your goal?

Please show your work along with your answers.

Explanation / Answer

a. To do this you plan on depositing an equal amount into the bank at the end of each mont. If the bank is willing to pay an annual rate of 3 percent, ho wmuch must you deposit each month to obtain your goal?

32000 = Monthly Equal amount FVIFA(0.25%,120)

From FV table we get the value of FVIFA(0.25%,120) = 139.738

Monthly equal amount to be deposited= 32000/139.738 =$229

b. To do this you plan on depositing an equal amount into the bank at teh end of each two-week period. If the bank is willing to pay an anuual rate of 3 percent, how much must you deposit every two weeks to obtain your goal?

32000 = amount FVIFA(0.1154%,260)

From FV table we get the value of FVIFA(0.1154%,260) = 303.030

Equal amount to be deposited= 32000/303.030=$105.60

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