John desires to accumulate $13, 603.83 by December 1, 2012.To accumulate that sum, he will make six equal semiannual deposits of $2, 000, beginning on June 1, 2010, into a fund that earns interest compounded semiannually.What annual rate of interest must the fund provide to yield the desired sum?
A)5%
B)6%
C)10%
D)12%

Question

Quizplus · Accepted Answer

To find the annual interest rate, we use the future value of an annuity formula. Solving for the interest rate that makes the future value of six $2,000 deposits equal to $13,603.83, we find that the rate is approximately 10% compounded semiannually.

John Desires to Accumulate $13, 603