How much money must be set aside today to make semi-annual payments of $3,000 for 5 years, if 8% interest...

Question

30. How much money must be set aside today to make semi-annual payments of $3,000 for 5 years, if 8% interest is compounded twice each year?
According to the Present Value of Ordinary Annuity Table, at 4% interest and 10 compounding periods, the correct factor is 8.11090.
$43,399.68
$16,248.96
$24,332.70
$12,006.11

SnapAndSolve AI · Accepted Answer

To find the present value of an annuity, use the formula:

PV = PMT × PVIFA

Where:

PV = Present Value
PMT = Payment per period ($3,000)
PVIFA = Present Value Interest Factor of Annuity

Given that the interest rate per period is 4% (since 8% annually compounded semi-annually is 4% per period) and there are 10 periods (5 years × 2), the PVIFA is 8.11090.

Calculate the present value:

PV = $3,000 × 8.11090 = $24,332.70

Therefore, the correct answer is $24,332.70.

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How much money must be set aside today to make semi-annual payments of $3,000 for 5 years, if 8% interest...

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