Use Table 12-2 from your text to find how much should be deposited now at 8% interest, compounded semiannually, to yield an annuity payment of $400 at the BEGINNING of each six months, for 2 years.
A) $1,510.04
B) $1,110.04
C) $1,451.96
D) $1,354.22

Question

Quizplus · Accepted Answer

The future value of an annuity is given by the formula:FV = PMT * [(1 + r/n)^(n*t) - 1] / (r/n)where:PMT is the payment amountr is the annual interest raten is the number of compounding periods per yeart is the number of yearsIn this case, we have:PMT = $400r = 8% = 0.08n = 2 (since the interest is compounded semiannually)t = 2Plugging these values into the formula, we get:FV = $400 * [(1 + 0.08/2)^(2*2) - 1] / (0.08/2)FV = $400 * [(1.04)^4 - 1] / 0.04FV = $400 * [1.169855 - 1] / 0.04FV = $400 * 0.169855 / 0.04FV = $1,510.04Therefore, the amount that should be deposited now is $1,510.04.

Use Table 12-2 from Your Text to Find How Much