Question

Determine the semi-annual deposits required to accumulate $4,000 four years from today, given an annual interest rate of 12%, compounded semi-annually. (Assume your deposits begin 6 months from now and there are 8 total deposits)

Answer 1

Answer : Calculation of Amount of Semi Annual Deposit

Semi annual Deposit = (Future Value * r ) / [(1 + r)^n - 1]

whre

r is the rate of interest per period i.e 12% / 2 = 6% or 0.06 (As there are two deposits in a year)

n is the number of deposits i.e 8

Future Value = $4000

Semi annual Deposit = (4000 * 0.06 ) / [(1 + 0.06)^8 - 1]

= 240 / [1.59384807451 - 1]

= 240 / 0.59384807451

= 404.14

$404.14 is  the semi-annual deposits required to accumulate $4,000 four years from today.