Question

You want to invest some money today that will grow, and later be used to support semi-annual annuity payments of $2500.00, the first one starting exactly 6 years from today. A total of 16 payments will be received over 8 years. If interest is earned at 6% compounded quarterly, how money should be invested today?

Answer #1

Semi-annual compounding APR is:

Particulars | Amount |

Given APR | 6.00% |

Given compounding frequency per year | 4 |

Effective annual rate | 6.136355% |

(1+ 0.06/4)^4 -1 | |

Required compounding frequency per year | 2 |

Req period effective rate | 3.0225% |

(1+ 0.06136355)^1/2 -1 | |

Required APR | 6.04500% |

0.030225*2 |

Particulars | Amount |

Annuity payment | 2,500.00 |

× PVAFD for 16 payments | 12.91853 |

Value in 6 years | 32,296.33 |

× PVF for six years | 0.69954 |

Deposit today | 22,592.70 |

Answer is:

22,592.70

please rate.

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