Congratulations! You have been accepted to study gourmet cooking at the Cordon-B

Question

Congratulations! You have been accepted to study gourmet cooking at the Cordon-Bleu Cooking School in Paris. You will need $10,000 every 6 months (beginning today) for the next three years to cover tuition and living expenses. Mom and Dad have agreed to pay for your education, and want to make one deposit today in a bank account earning 6% interest, compounded semi-annually. How much must they deposit now so that you can withdraw $10,000 at the beginning of each semester over the next 3 years? Answer A)54,172 B)$55,797 C)$57,422 D)$56,604

Explanation / Answer

The correct answer is $55,797

int rate = 0.06/2

no of periods = 3*2 = 6

each payment = $10,000

and this is a case of annuity due at the beginning of the year

PV=PV(0.06/2,6,10000,0,1) = $55,797

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