Question

You wish to accumulate $14,580 in 6 years. Payments are made at the end of every six-month period into an account earning 7.2% compounded semi-annually. Find the required payment amount to accomplish your goal.

Answer 1

Equation required for this question:

an • 1.072^n = 14,580

Where a = payment every half year and n = number of half years

There are 12 half years in 6 years.

Therefore n = 12, substitute this.

12a • 1.072^12 = 14,580

12a = 14,580 / 1.072^12

12a = 6,330~

a = 527.5 ~