Question

Parents wish to have $130,000 available for a child's education. If the child is now 6 years old, how much money must be set aside at 4% compounded semiannually to meet their financial goal when the child is 18?

Answer 1

Explanation:

We know that:

FV = $130,000

r = 4% (semiannually )

We need to find number of periods (n) , the child is now 6 years old, until the child is 18 is 12 years. But it is the rate is compounded semiannually, so n = 12*2 = 24

We have the fomula to find out periodic payment (see the attached photo)

=> pmt = 3326.288