Assume That You Just Had a Child,and You Are Now

question 28

Multiple Choice

Assume that you just had a child,and you are now planning for her college education.You would like to make 43 equal payments over the next 21 years (the first payment to be made immediately,all other payments to be made at 6-month intervals,with the final payment to be made at her 21st birthday) so that you will be able to cover her expected expenses while in school.You expect to pay expenses on her 18th,19th,20th,and 21st birthdays.Assume that the current (time period 0) annual cost of college is $6,000,that you expect annual inflation to be 8 percent for the next 5 years,and then 5 percent thereafter.If you expect to be able to earn a return of 4 percent every 6 months on your investments (a simple rate of 8 percent with semiannual compounding) ,what will be the amount of each of the 43 payments?

• A) $705.86
• B) $731.93
• C) $692.15
• D) $650.46
• E) $785.72

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Definitions:

Anti-Federalists

Individuals or groups who opposed the adoption of the U.S. Constitution, advocating for a weaker central government in favor of stronger state governments.

Patrick Henry

was an American attorney, planter, and orator best known for his declaration to the Second Virginia Convention (1775): "Give me liberty, or give me death!"

Samuel Adams

An American statesman, political philosopher, and one of the Founding Fathers of the United States, known for his role in organizing the Boston Tea Party and in forming the Continental Congress.

Political Institutions

Structures and systems within a society that govern the conduct of public affairs, politics, and policy-making.