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 interperiod 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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