Congratulations! You have been accepted to study gourmet cooking at the Cordon-B
ID: 2690515 • Letter: C
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)$56,604Explanation / 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