Question

Karen White wants to accumulate $13,500 by the end of 12 years. If the annual interest rate is 5.70 percent and interest compounds semiannually, how much will she have to invest today to achieve her goal? (If you solve this problem with algebra round intermediate calculations to 6 decimal places, in all cases round your final answer to the nearest penny.) Present value of investment $

Answer 1

Information provided:

Future value= $13,500

Time= 12 years*2= 24 semi-annual periods

Interest rate= 5.70%/2= 2.85% per semi-annual period

The question is solved by computing the present value.

Enter the below in a financial calculator to compute the present value:

FV= 13,500

N= 24

I/Y= 2.85

Press the CPT key and PV to compute the present value.

The value obtained is 6,877.5010.

Therefore, she will have to invest $6,877.50 today to achieve her goal.

In case of any query, kindly comment on the solution.