00:01
A father decides to provide $40 ,000 to his son on his 21st birthday.
00:07
How much should he deposit every six months into a saving account that pays 3 .5 % compounded semi -annually if the first deposit was made when the son was 3 .5 years old? so we're looking at 3 .5 % annually.
00:23
So if it's semi -annually, we need to divide that by 2.
00:26
So we're going to say 3 .5 divided by 2 is going to be 1 .75%, but we need to change that to 0 .175 as a decimal to use for r in our formula.
00:39
Now, the d is the deposit, which is what we're looking for.
00:43
Our balance is our b.
00:44
That's going to be our $40 ,000.
00:47
The only thing left to determine is the value of n, and that's going to be the number of periods.
00:53
Well, it's semi -annually from the time he's 3 .5 years old to 21 years.
00:58
So how many 6 -month periods are in there? so if we look from the time he's 21 minus 4, that's going to be 17 periods.
01:09
However, 17 years.
01:12
However, when we subtract that, we're eliminating his fourth year.
01:15
So we need to add 1.
01:17
So that's actually 18 years from the time you're 4 to 21...