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You want to deposit an amount of money now so that at the end of 5...

You want to deposit an amount of money now so that at the end of 5 years $500 will have been accumulated. With interest at 4% per year, which is compounded semiannually, how much should be deposited now?

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Answer #1

The future value is given as $500. The rate of interest (r) is 5% and the number of years is 5.

The future value can be calculated by the following formula:

Since the interest rate is compounded semiannually, the number of periods are 2n and the interest rate is r/2 as there are two compounding periods in a year.

Putting the values:

So, $410.18 must be invested now to receive $500 after 5 years at the given interest rate.

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