Question

Please show how to enter this on a financial calculator, specifically the HP10BII+

P 5-10 (similar to) :5 Question Help Suppose the interest rate is 9.2% APR with monthly compounding. What is the present value of an annuity that pays $105 every six months for five years? (Note: Be careful not to round any intermediate steps less than six decimal places.) The present value of the annuity is $ . (Round to the nearest cent.)

Answer 1

rate positively ..

First we have to convert the Monthly compounding rate into effective annual rate and then semiannual compounding rate.

Annual effective rate =

(1+9.2%/12)^12-1

Annual effective rate =

9.60%

computation of semiannual compounding rate =

((1+9.6%)^0.5-1)*2

Semiannual compounding rate =

9.38%

We have to use now financial calculator to solve for present value

put in calculator-

FV

0

PMT

-105

I

9.38%/2

4.69%

N

5*2

10

Compute PV

$823.17

Ans =

$823.17