Question

Tuition of â$1968 will be due when the spring term begins in 6 months. What amount should a student depositâ today, at 7.16â%, to have enough to pay theâ tuition?

Answer 1

$113.16 (2 decimal place)

Explanation:

The formula for calculating the payment amount is shown below:

P = iF/(1+i)^N-1

Where: P = The amount to be made periodically

i = Interest rate per period

F = The future amount to be achieved

N = The total number of payments for the entire loan or investment

i = 7.16/12 = 179/300

F = $1968

N = 6

P = (179/300*$1968)/(1+179/300)^6-1

P = $1174.24/(1+179/300)^6-1

P = $1174.24/(479/300)^5

P = $1174.24/(479/300)^5

P = $1174.24/10.3769875

P = $1174.24/10.3769875

P = $113.1580818

P ≈ $113.16