Question

What semi-annual payment must be made into a fund at the beginning of every six months to accumulate to $4800.00 in ten years at 7.25% compounded semi-annually? question 5 options:

a. $99.21
b. $169.34
c. $700.69
d. $161.70
e. $163.99

Answer 1

To accumulate $4800.00 in ten years at 7.25% compounded semi-annually, a semi-annual payment of approximately $169.34 must be made into the fund at the beginning of every six months.

Step-by-step explanation:

To find the semi-annual payment, we need to use the formula for the future value of an ordinary annuity:

FV = P * [(1 + r/n)^(n*t) - 1] / (r/n)

Where FV is the future value, P is the payment, r is the interest rate, n is the number of compounding periods per year, and t is the number of years.

Plugging in the given values, we have:

4800 = P * [(1 + 0.0725/2)^(2*10) - 1] / (0.0725/2)

Using a financial calculator or spreadsheet, we find that P ≈ $169.34