Question

Suppose you invest semiannually for 25 years in an annuity that pays 5% interest, compounded semiannually. At the end of the 25 years, you have $500,000. How much of this total is interest? Enter your answer rounded to the nearest hundred dollars.

Answer 1

Calculate the total interest paid as follows: Results from calculation: 59 1 Rate 2 nper 25 3 Future value 500,000 4 Compounding Semi-annual 5 Payment S5,129.03 6 Total amount paid $256,451.42 7 Value at the end of 5 years $500,000.0 8 Total Interest paid $243,548.58|| Formulas used in the calculation: 1 Rate 0.05 2 nper 25 3 Future value 500000 4 Compounding Semi-annual 5 Payment =PMT(B1/2,B2*2,,-B3) 6 Total amount paid =B5*B2*2 7 Value at the end of 5 years 500000 8 Total Interest paid =B7-B6 The requirement is to round the answer to nearest hundred. Therefore, the answer is $243,500.