Question

1

a)

You invested $9,500 at the end of each half-year for 5 years in an investment fund. At the end of year 5, if the balance in the fund was $111,000, what was the nominal interest rate compounded semi-annually? 0.00% Round to two decimal places

b)

Answer 1

(a) Half-Yearly Payments = $ 9500, Savings Tenure = 5 years or (5 x 2) = 10 half-years, Fund Balance at the end of Year 5 = $ 111000, Compounding Frequency: Semi-Annual, Let the semi-annual rate be r %

Therefore, 9500 x (1+r)^(9) + 9500 x (1+r)^(8) +..............+ 9500 = 111000

9500 x [{(1+r)^(10)-1}/{(1+r)-1}] = 111000

11.6842 = [{(1+r)^(10)-1}/{(1+r)-1}]

Using EXCEL's goal seek function to solve the above equation, we get:

r = 0.03413 or 3.413 % ~ 3.41 %

NOTE: Please repost part(b) of the question as the loan tenure is not visible in the image posted.