Question

Tabby Soft believes that it will need new equipment in 5 years. The equipment will cost $26,000. What lump sum should be invested today at 6%, compounded semiannually, to yield $26,000?

Answer 1

26000=p(1+0.06/2)^(2*5)
Solve for p
P=26,000÷(1+0.06÷2)^(2×5)
P=19,346.44

Answer 2

The answer is $19346.67.

Explanation:

The A = 26000

r = 6% or 0.06

n = 2

t = 5

We have to find p.

Compound interest formula is :

`A=p(1+r/n)^(nt)`

Now putting the values in the formula we get

`26000=p(1+0.06/2)^(10)`

`26000=p* 1.3439`

p = $19346.67

Therefore, tabby should invest $19346.67.