Question

Betty DeRose is going to deposit $20,000 into a savings account
at the beginning of every six months for the next eight years.
Assume the savings account will earn 12% interest compounded
semi-annually.

Calculate the amount of interest Betty DeRose will earn over
the eight year period.

You will need to use the time value of money table factors posted
in carmen to answer this question. To access these factors, click
modules and then scroll to the time value of money topic. Click
on the link labeled present & future value table factors. No
credit will be awarded for this question using a means other
than these table factors to answer this question.

Answer 1

periodic payment P = 20000

no of years = 8

no of payments n = 8 * 2

= 16

total periodic payments = 16 * 20000

= $ 320000

rate of interest = 12%

I = 12 % / no of payments in a year

= 12%/2

= 6 %

Future value = P * FVAD ( I = 6% , n= 16 )

= 20000 * ( 27.2129 )

= $ 544258

interest earned on account = Future value - total periodic payments

= 544258 - 320000

= $ 224258

Note : if the answer is wrong please provide me table factors posted in Carmen and you can get the answer by replacing FVAD ( 27.2129 ) with factor provided in carmens table