Question

You would like to have ​$4,000 in 55 years for a special vacation following graduation by making deposits at the end of every six months in an annuity that pays 6.56.5​% compounded semiannually. Determine how much you should deposit at the end of every six month.

Answer 1

total amount deposit at end of every 6 month is $445.37

Step-by-step explanation:

Future value required= 4000

Total 6 months Period in 4 years (n) = 4*2 = 8

Interest rate 6.56% or 0.656 compounded Semiannual

semiannual interest rate (r) =0.0656/2= 0.0328

Future value of annuity formula = P *{ (1+r)^n - 1 } / r

4000 = P*(((1+0.0328)^8)-1)/0.0328

4000= P* 8.98

P = $ 445.37

total amount deposit at end of every 6 month is $445.37