Question

What lump sum deposited today at 8​% compounded quarterly for 5 years will yield the same...

What lump sum deposited today at 8​% compounded quarterly for 5 years will yield the same final amount as deposits of ​$5000 at the end of each​ 6-month period for 5 years at 4​% compounded​ semiannually? The value of the lump sum is ​$ .............. ​(Round to the nearest cent as​ needed.)

0 0
Add a comment Improve this question Transcribed image text
Answer #1

Answer:

First we need to find Future value of Annuity Future value of Annuity is = P*((1+r)n-1/r) P is Deposit per year S 5,000/- Semi Annual Interest rate is 2% Number of Semi Annuals is 10 Future value of Annuity-5000 (C1+0.02)10-1/0. 02 Future value of Annuity 5000 10.9497 Future value of Annuity S 54,748.60/ Now we need to find the Lumpsum deposit amount using Future value formula Future value Present value * (Hr Future value is S 54,748.60 Present Value r is Rate of Interest per Qtr-2% No of Qtrs in 5 years is 20 54748.60 Present Value (1+0.02)20 54748.60= Present Value * 1.48595 Present Values 36,844.24/- So, S 36,844.24 as a lump sum deposit to be made to yield the same final amount.

Add a comment
Know the answer?
Add Answer to:
What lump sum deposited today at 8​% compounded quarterly for 5 years will yield the same...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions
ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT