Question

Find the present value of an annuity of $5000 paid at the end of each 6-month period for 6 years if the interest rate is 7%, compounded semiannually. (Round your answer to the nearest cent.)

Answer 1

The answer is $48317.14.

Explanation:

Payment or pmt = 5000

rate = 7% compounded semiannually

n =
`6*2=12`

We have to find p

The formula is :

`p=pmt[(1-(1)/((1+r)^(n)))/(r)]`

r =
`(7)/(2(100)) =0.035`

Substituting the values we get;

`p=5000[(1-(1)/((1+0.035)^(12)))/(0.035)]`

=>
`p=5000[(1-(1)/((1.035)^(12)))/(0.035)]`

=>
`p=5000[(1-0.66178)/(0.035)]`

=>
`p=5000[(0.33822)/(0.035)]`

= $48317.14

The answer is $48317.14.