The nominal interest rate is 14% compounded semiannually. What amount will need to be deposited every six months tobe able to have enough money to pay three annuity payments of $20,000 for three years beginning at the end ofyear seven? The deposits begin now and continue every six months until six deposits have been made.The amount to be deposited every six months is $(Round to the nearest dollar.)

Answered: compoun deposited eve be able to have…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The nominal interest rate is 14% compounded semiannually. What amount will need to be deposited every six months to
be able to have enough money to pay three annuity payments of $20,000 for three years beginning at the end of
year seven? The deposits begin now and continue every six months until six deposits have been made.
The amount to be deposited every six months is $
(Round to the nearest dollar.)

Expert Solution

Step 1: Define future value

Cash flow:

The sum of the total money is represented in the diagram. It represents the magnitude and flow of cash. In the graph, the expenses are down arrows and revenue are up arrows.

To calculate the future value,the formula is:

$F V equals P V cross times left parenthesis 1 plus r right parenthesis to the power of n$

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