Question

Parents agree to invest $600 (at 6%, compounded semiannually) for their son on the December 31 or June 30 following each semester that he makes the dean's list during his 4 years in college. If he makes the dean's list in each of the 3 semesters, how much money will his parents have to give him when he graduates? (a) State whether the problem relates to an ordinary annuity or an annuity due ordinary annuity O annuity due (6) Solve the problem (Round your awwer to the nearest cent)

Answer 1

seri-anna T h = ho of payment for years 0 Given, Anoust have to invest - $600 Interest rate= 67. compounded eually Line periods 4 years Ordinary annuity Answer 6 lal know Future Future value of os dinary annuity is given by Putuse value= R [eltigh_1] where = cash flow per period - $600 da interest rate = 6%. Conpourded - 4x2 = 8 Puturke Value = 600 [(1+0.03) 81] 0.03 = 600 x 100 [(1.0328_1 2 = 20000 [(1.0338 - 1] = [5335-40 dollars sceni-annually - 0.06 = 0.03 $ 200

Gulven, Amount have to invest = $4000 Interest rate a 12% compounded ahrually Line period - 7 years ordinary arowity futurice value = R [chtigh_1] Arswer where Ra cash flow per period = $4000 da interest rate = 0.12 he ho of payments = 7 Futurve value= 4000 [ (1+0.12) 71] 2000 50 0112 yooox too [ (1«1237-1] 1263 100000 = 140356.05 dollars Anwar