Question

At the end of every six months, Steve deposits $300 into a building and loan association that pays 10% compounded semi-annually. At the end of 10 years, how much will he have to his credit?

*Need answer with formula, please, not spreadsheet.

Answer 1

Answer - $ 17,182.50

Explanation -

Future Value of Annuity = P ( ( (1 + r)n - 1 ) / r )

wherein,

P = Periodic payment

r = Rate every period

n = Number of periods

In the given question,

P = $ 300

r = 10%

n = 20 ( 10 years x 2 )

Future Value = 300 ( ( ( 1 + 0.10 )20 - 1 ) / 0.10 )

= 300 ( ( 6.7275 - 1 ) / 0.10 )

= 300 ( 5.7275 / 0.10 )

= 17,182.50

Therefore, Steve will have $ 17,182.50 at the end of 10 years to his credit.

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