Question

After graduation in 3 years, Antwone would like to take a much needed vacation to the Caribbean Islands. He anticipates that the all inclusive vacation package will cost him $3,000. His bank will pay 7% per year compounded semiannually. How much does he need to deposit into this account each semiannual period, so that he can take his vacation in 3 years?

Answer 1

Answer:

semiannual deposit= $458

Explanation:

Giving the following information:

He anticipates that the all inclusive vacation package will cost him $3,000. His bank will pay 7% per year compounded semiannually.

To calculate the semiannual deposit, we need to use the following formula:

FV= {A*[(1+i)^n-1]}/i

A= semiannual deposit

Isolating A:

A= (FV*i)/{[(1+i)^n]-1}

A= {3,000*0.035) / [(1.035^6) - 1]

A= $458