Question

A debt of $3571.31 is due November 1, 2025. What is the value of obligation on May 1, 2016, if money is worth 4% compounded semi-annually?

The is the value of the obligation is $____.

Answer 1

2500.49

Explanation:

--Given--

Amount (A): $3571.31

Rate (r): 4%

Compound (n): 2 **semi-annually means 2 times a year**

Time (t): 9 **2016 to 2025 is 9 years time**

--Solve--

P = A / (1 + r/n)^nt

= 3571.31 / (1 + .04/2)^(2 * 9)

= 3571.31 / (1.02 )^(18)

= 3571.31 / 1.02¹⁸

= 3571.31 / 1.02¹⁸

= 3571.31 / 1.428246

= 2500.49