Homework Answers
i = 12% / 4 = 3% per quarter
Effective semi annual interest rate = (1+0.03)^2 -1 = 1.03^2 -1 = 1.0609 - 1 = 0.0609 = 6.09%
Total semi annual periods = 2 * 2 = 4
Equivalent amount of new income required = 30000 * (A/P,6.09%,4)
= 30000 * 0.0609 * ((1 + 0.0609)^4)/((1 + 0.0609)^4-1)
= 30000 * 0.0609 * ((1.0609)^4)/((1.0609)^4-1)
= 30000 * 0.289186
= 8675.58
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