Question

Stan wants to start an IRA that will have $250,000 in it when he retires in 25 years. How much should he invest semiannually in his IRA to do this if the interest is 6% compounded semiannually? Assume an Annuity Due. Round to the nearest cent

Answer 1

See the formula of the future value of annuity due through Google
Solve for PMT
PMT=250,000÷((((1+0.06÷2)^(2
×25)−1)÷(0.06÷2))×(1+0.06÷2))
=2,151.82

Answer 2

Answer:

He sould invest $2,151.82

Step-by-step explanation:

Data:

FV = $250,000

n = 25 years = 50 semesters

i = 6% annually / 2 semesters = 3% = 0.03

$PMT = \frac{i*FV}{(1+i)^{n}-1}x\frac{1}{(1+i)}=\frac{0.03*250,000}{(1+0.03)^{50}-1}x\frac{1}{(1+0.03)}=\frac{7,500}{(1.03)^{50}-1}x\frac{1}{(1.03)}=\frac{7,500}{4.3839-1}x0.970873=\frac{7,500}{3.3839}x0.970873=2,216.38x0.970873=2,151.82$

Hope this helps!