Question

Solve the problem. Round to the nearest cent. Tabby Soft believes that it will need new equipment in 5 years. The equipment will cost $26,000. What lump sum should be invested today at 6%, compounded semiannually, to yield $26,000?

Answer 1

Hi there
The formula of compound interest is
A=p (1+r/k)^kt
A future value 26000
P present value?
R interest rate 0.06
K compounded semiannual 2
T time 5 years
We need to solve for p
P=A÷ (1+r/k)^kt
So
P=26,000÷(1+0.06÷2)^(2×5)
P=19,346.44

Good luck!