How much would your parents have to deposit each month into an account that grows at a rate of 12% per year, compounded semiannually, if they want to have $80,000 at the end of year 3 to cover part of your college expenses? Assume no interpeĀ­riod compounding. Also, write the spreadsheet function to display the monthly amount.

What will be an ideal response?


First find equivalent amount per 6-months and then divide by 6 to get monthly deposit
A per semiannual period = 80,000(A/F,6%,6)
= 80,000(0.14336)
= $11,468.80
Monthly deposit = 11,468.80/6
= $1911.47

Spreadsheet function: = PMT(6%,6,,80000)/6 displays -$1911.50

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