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

Question

Mathematics

Kenneth Patterson

10 December, 09:44

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

+2

Answers (1)

Know the Answer?

Maxim Barton · Answer 1

The future value annuity is given by:

FV = (1+r) * p{[ (1+r) ^n-1]/r}

our value will be:

FV = (1+0.071/2) * 450{[ (1+0.071/2) ^ (9*2) - 1]/0.071/2}

FV=11,468.337

The present value of the annuity will be:

FV=PV (1+r) ^n

11,468.337=PV (1+0.071) ^9

solving for PV we get

PV=6185.791

Answer: PV=$6185.791

Answer is D]