Question

Mr. Joseph will need 6 million baht to replace the machine for his factory in 5 years. He makes semi-annual deposit of 400,000 baht with 8% compounded semi-annually. How much will he get at the end of year 5?

Select one:

a. 5,445,380 baht.

b. 4,802,400 baht.

c. 5,240,520 baht.

d. 6,088,000 baht.

Answer 1

Semi - Annual deposit (in Baht)	400000
Interest rate	8.00%
Semi annual rate ---> Annual rate /2	4.00%
No. of years	5
No. of deposits ---> No. of years x 2	10

Future value of deposits = Semi annual deposits x FV of annuity factor

Future value of deposits = Semi annual deposits x (((1+Semi annual rate)^no. of deposits -1)/Semi annual rate)

Future value of deposits = 400000 x (((1+4%)^10 -1)/4%)

Future value of deposits = 400000 x 12.006

Future value of deposits = 4,802,400

Therefore Mr. Joseph would have 4,802,400 Baht at the end of 5 years. Hence the right option is "b" - 4,802,400 Baht.

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