asked 127k views
5 votes
If a bank pays 15% compounded semi-annually, how much should be deposited now to have $1800 in 6 years from now?

asked
User GWu
by
7.9k points

1 Answer

3 votes

The interest rate compounded semiannually is 15/2 = 7.5%.

The number of compounding periods is 6 years * 2 = 12.

The formula for compound interest is A = P(1 + r/n)^nt, where:

* A is the final amount

* P is the principal amount

* r is the interest rate

* n is the number of compounding periods per year

* t is the number of years

In this case, we have A = $1800, r = 7.5%, n = 12, and t = 6.

Solving for P, we get:

```

P = A / (1 + r/n)^nt

P = $1800 / (1 + 0.075)^12 * 6

P = $683.27

```

Therefore, you need to deposit $683.27 now to have $1800 in 6 years from now.

answered
User Vgoklani
by
7.6k points
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