Question

Every six months, Jacinda deposits $475 into an interest-bearing account to save for her children’s tuition. The interest rate on the account is 7.1% compounding semiannually. What is the present value of the investment if Jacinda’s children leave for college in 9 years?

$4,743.77

$5,080.58

$6,460.70

$6,239.21

Answer 1

first, figure out which formula u need to use here

Answer 2

@ganeshie8 what formula would i use for this? would it be \[PV =\frac{ FV }{ (1+i)^{nt} }\]

Answer 3

nope

Answer 4

Every six months, Jacinda deposits $475 into an interest-bearing account...

that means, its an "annuity" problem

Answer 5

its not just one payment,
she is making payments every 6 months right ?

Answer 6

but how do you know if its at the beginning or at the end?

Answer 7

very good question :)

Answer 8

if nothing was specified, assume payments are at the end

Answer 9

by default, payments are at hte end only always

Answer 10

if it is at the beginning, the question will specify

Answer 11

ok that part always confuses me so with this problem im going to use PVOA?

Answer 12

Exactly !

Answer 13

alright i wrote it down would C be 475 then i would be .071 and then i think nt would be 6*9=54 @ganeshie8

Answer 14

not quite

Answer 15

The interest rate on the account is 7.1% compounding semiannually

Answer 16

ohh so id divide by 2 then that would be i

Answer 17

yup !

and also n = 2

Answer 18

so nt would actually be 18

Answer 19

Correct !

Answer 20

this is where i need help i did 1/ .0355 and i got 28.16901408

Answer 21

correct !

Answer 22

simply feed everything to wolfram :

http://www.wolframalpha.com/input/?i=475*%281%2F%280.071%2F2%29+-+1%2F%280.071%2F2%281%2B0.071%2F2%29%5E%282*9%29%29%29+

Answer 23

^^

Answer 24

thats what im trying to avoid bc then i wont know how to do it on my own

Answer 25

at this level, u need to knw how to figure out what numbers to plugin. not how to work tedious multiplications manually

Answer 26

this is advanced financial algebra course, right ?

Answer 27

yes ive had a lot of trouble with the investment part and my teacher doesnt help at all

Answer 28

I see you're working hard and im sure u wil master these quickly :)
just dont waste time on dividing 1/0.000333345 manually... u wont achieve anything

Answer 29

instead, spend time on figuring out what is compounding interval / frequency of investments, etc... multiplications/divisions are for kids, not u :)

Answer 30

im trying to master it i have my exam tomorrow

Answer 31

semister exam ?

Answer 32

no the lesson exam on investment

Answer 33

oh cool :)
just learn to differentiate between "annuity" versus "fixed investment"

Answer 34

Ask the question this : Is he/she making ONE single payment ? or is he/she making regular payments over a long a period of time ?

Answer 35

what does it mean when they say annualy versus semiannually?

Answer 36

annually = 1 time a year
semi annually = 2 times a year

Answer 37

quarterly = 4 times a year

Answer 38

semi annul compounding means : they calculate the interest "two times" a year

Answer 39

that clears up a lot for me thank you

Answer 40

np :) more practice = more clarity
wish u good luck with the exam !