How much money do I need now if I am going to recieve $5000 every 6 months (starting in 6 months) for 10 years if the interest rates are 4%/a compounded semi-annually?

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28-07-2022
Mathematics

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How much money do I need now if I am going to recieve $5000 every 6 months (starting in 6 months) for 10 years if the interest rates are 4%/a compounded semi-annually?

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xero099 xero099 · Answer 1 · 2022-07-28T20:53:43+02:00

By using the compound interest model, the initial deposit required to receive $ 5 000 every 6 months is $ 125 000.

How many money should be deposited in the beginning to receive a certain amount periodically

In this problem we must apply the compound interest model, which represent a periodic accumulation of interest according to the following formula:

C' = C · (1 + r/100)ˣ (1)

Where:

C - Initial deposit
r - Interest rate
C' - Resulting money
x - Period index

If we know that x = 1, r = 4, C = x and C' = x + 5 000, then the initial deposit is:

x + 5 000 = x · (1 + 4/100)

x + 5 000 = 1.04 · x

0.04 · x = 5 000

x = 125 000

By using the compound interest model, the initial deposit required to receive $ 5 000 every 6 months is $ 125 000.

To learn more on compound interest: https://brainly.com/question/14295570

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