Asked by Lillian Hernandez on May 25, 2024
Verified
Newton Kress plans to give his son $12,500 when his son turns 21, which will be 5 years from now. If Newton finds an investment that will pay 8% compounded semiannually, compute the amount that he must invest today to achieve his goal. (Use Tables 16-1A&B or 16-2A&B or a calculator.)
Compounded Semiannually
Compounded Semiannually refers to the process of applying interest to both the initial principal and accumulated interest of a deposit or loan on a twice-yearly basis.
Present Value
The today's price of a future amount of money or streams of cash inflow, under a specified yield rate.
- Compute the future worth of investments by applying the compound interest formula.
- Implement the use of financial tables or calculators to work through time value of money equations.
- Gain insight into how different compounding frequencies influence the expansion of investments.
Verified Answer
TC
Tanner CereghinoMay 29, 2024
Final Answer :
0.08 ¸ 2 = 0.04; 2 ´ 5 = 10;
$12,500 ´ 0.67556 = $8,444.50 invest today
$12,500 ´ 0.67556 = $8,444.50 invest today
Learning Objectives
- Compute the future worth of investments by applying the compound interest formula.
- Implement the use of financial tables or calculators to work through time value of money equations.
- Gain insight into how different compounding frequencies influence the expansion of investments.
Related questions
Two-And-One-Half Years from Now, Melanie Olson Wants to Have $8,500 ...
Maria Gomez, an Attorney, Plans to Replace All of Her ...
Compute the Present Value in Each of the Following Problems ...
Compute the Present Value in Each of the Following Problems ...
James Parker Wants to Buy a New Motorcycle 4 Years ...