Assume That You Just Had a Child, and You Are

question 82

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 R6,000, 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 semi-annual compounding) , what will be the amount of each of the 43 payments?

• A) R705.86
• B) R731.93
• C) R692.15
• D) R650.46
• E) R785.72

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Definitions:

Classical Conditioning

A learning strategy that incorporates the frequent association of two stimuli, culminating in the first stimulus independently eliciting a response that was at first triggered by the second stimulus.

Delayed Reinforcement

A reinforcement method where a reward or punishment is not immediately given, influencing future behavior over a longer time period.

Law of Effect

A principle in psychology that states behaviors that produce satisfying effects are likely to be repeated, while those that produce unpleasant effects are less likely to be repeated.

Cognitive Map

A mental representation of the layout of one’s environment. For example, after exploring a maze, rats act as if they have learned a cognitive map of it.