An individual wishes to deposit an amount of money now to have an accumulation o

Question

An individual wishes to deposit an amount of money now to have an accumulation of $5000 at the end of 5 years. if the interest rate is at 10% per year, compounded semiannually, determine how much should be deposited An individual wishes to deposit an amount of money now to have an accumulation of $5000 at the end of 5 years. if the interest rate is at 10% per year, compounded semiannually, determine how much should be deposited An individual wishes to deposit an amount of money now to have an accumulation of $5000 at the end of 5 years. if the interest rate is at 10% per year, compounded semiannually, determine how much should be deposited

Explanation / Answer

FV = 5000

N = 5x2 =10

R= 10%/2 =5%

We have the following formula for PV

PV = FV/(1+r^n

      = 5000/ (1+0.05)^10

      = 5000/ 1.6289

      = 3,069,57

Therefore, they need to deposit 3069.57

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