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March 30, 2017

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Ed long promised to pay is son $400 semiannually for 12 years. Assume Ed can invest his money at 6 % in an ordinary annuity. How much must Ed invest today to pay his son $400 semiannually for 12 years?

  • Math - ,

    i = .06/2 = .03
    n = 24
    Present value = 400(1 - 1.03^-24)/.03
    = ....

    you do the button-pushing

  • Math - ,

    12 years x2 =24periods

    6%/2=3%

    24 periods @3%

    400 x 16.9355= $6,774.20

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