The owner of a company plans to expand his firm 6 years from now so he plans to make quarterly deposits of P100,000 in a bank account for 5 years. If the deposits will be made at the start of the periods, how much money can he withdraw to start the expansion by the end of the 6th year if the money earns an interest of 15% compounded semi-annually? Show complete solution with cash flow diagram

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A:

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.