1. Cheraw Auto Repair believes that it will need new equipment in 10 years. The equipment will cost 11) $26,000. What lump sum should be invested today at 8% compounded semiannually, to yield $26,000?
2.
Semi annual interest=(8/2)=4%=0.04
Future value (FV)=Present Value (PV)*((1+i)^N)
i=Interest per period=0.04
N=Number of Periods=10*2=20
Future Value (FV)=$26000
Lump sum to be invested today=PV=FV/((1+i)^N)=26000/(1.04^20)= $11,866.06
Lumpsum to be invested today |
$11,866.06 |
1. Cheraw Auto Repair believes that it will need new equipment in 10 years. The equipment will co...