Question

Your parents are giving you $250 a month for 4 years while you are in college. At an interest rate of .57 percent per month, what are these payments worth to you when you first start college? Multiple Choice

A. $9,948.86
B. $13,757.37
C. $10,472.48
D. $10,123.40
E. $10,282.18

Answer 1

To calculate the worth of the monthly payments when you first start college, we can use the formula for future value of an ordinary annuity. The payments are worth approximately $10,282.18 when you first start college.

Step-by-step explanation:

To calculate the worth of the monthly payments when you first start college, we can use the formula for future value of an ordinary annuity. The formula is:

FV = P * [(1 + r)^n - 1] / r

Where FV is the future value, P is the monthly payment, r is the interest rate per month, and n is the number of months.

Substituting the given values into the formula:

FV = $250 * [(1 + 0.0057)^48 - 1] / 0.0057

FV ≈ $10,282.18

Therefore, the payments are worth approximately $10,282.18 when you first start college.