you have been accepted into college. The college guarantees that your tuition will not increase for the four years you attend college. The first $ 10 comma 600 tuition payment is due in six 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 3.9 % (with semiannual compounding) guaranteed to remain the same over the next four years. How much money must you deposit today if you intend to make no further deposits and would like to make all the tuition payments from th

Question

Aubrie

Business

8 January, 14:45

you have been accepted into college. The college guarantees that your tuition will not increase for the four years you attend college. The first $ 10 comma 600 tuition payment is due in six 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 3.9 % (with semiannual compounding) guaranteed to remain the same over the next four years. How much money must you deposit today if you intend to make no further deposits and would like to make all the tuition payments from th

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Vaughn Yu · Answer 1

we assume fees paid as annuity (PMT)

Now we have to find Present Value (PV) of annuity

PV = PMT * (1-1 / (1+r) n) / r

PMT = 10600

n = 8 payments

3.9% compounded semi annual

r = 3.9% / 2 = 1.95% = 0.0195

PV = 10600 * (1-1 / (1+0.0195) 8) / 0.0195

PV = 10600*0.143155 / 0.0195 = 73412.820513