A grandmother has a granddaughter entering university next year. Her granddaughter expects to remain in school for five years and receive a PhD. This grandmother wishes to provide P 50,000 semiannually to her granddaughter to help her with the expenses. (a) Assuming a 4.5% interest rate convertible semiannually, how much does the grandmother have to deposit today to provide ten annual payments starting six months from now and continuing for ten years? (b) How would this compare (use order relation symbols e.g. (a)>(b) ). if the granddaughter receives half of the amount every quarter at 4.5% interest convertible quarterly; (c) Do (a) if each of the payments was to be given before each semester start instead?
A grandmother has a granddaughter entering university next year. Her granddaughter expects to remain in school for five years and receive a PhD. This grandmother wishes to provide P 50,000 semiannually to her granddaughter to help her with the expenses. (a) Assuming a 4.5% interest rate convertible semiannually, how much does the grandmother have to deposit today to provide ten annual payments starting six months from now and continuing for ten years? (b) How would this compare (use order relation symbols e.g. (a)>(b) ). if the granddaughter receives half of the amount every quarter at 4.5% interest convertible quarterly; (c) Do (a) if each of the payments was to be given before each semester start instead?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A grandmother has a granddaughter entering university next year. Her granddaughter expects to
remain in school for five years and receive a PhD. This grandmother wishes to provide P 50,000
semiannually to her granddaughter to help her with the expenses.
(a) Assuming a 4.5% interest rate convertible semiannually, how much does the grandmother have
to deposit today to provide ten annual payments starting six months from now and continuing
for ten years?
(b) How would this compare (use order relation symbols e.g. (a)>(b) ). if the granddaughter
receives half of the amount every quarter at 4.5% interest convertible quarterly;
(c) Do (a) if each of the payments was to be given before each semester start instead?
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