Compute the future value at the end of the year 32 of $150 deposited every month for 22 years (with the first deposit made one month from today) into an account that pays 6 percent p.a. with semi-annual compunding.
OK...here is where I'm stumped. I understand that this is a 2 part question...the first part being an ordinary annuity for 22 years and the second part being a future value of a lump sum for 10 years. It is the ordinary annuity that is troubling me.
Here is what I entered in my finance calculator:
N=44 (22 years * 2 as the interest is compounded semi-annually)
PMT=150 * 6 = 900 (monthly payment * 6 as this is compounded only every six months so we are indiffernet between paying 150 a month or 900 every 6 months)
I/Y=3% (6p.a. / 2 as it is semi-annually compounded)
FV=?
Computed FV = 80,143.56820
Is this accurate or did I put the wrong information in for N and I/Y?
2007-04-02 15:59:36 · 3 answers · asked by Greg C 7 in Business & Finance ➔ Other - Business & Finance
Note..I am only trying to figure out the FV of the ordinary annuity (not the lump sum from year 23-32).
2007-04-02 16:02:38 · update #1
Becareful of the semi-annual compounding. That is where your calculations are wrong.
What you should do is convert the semiannual 6% into an annual rate, which is 1.03 x 1.03 = 1.0609 ---> 6.09%
Based on this, your I/Y should be 6.09/12 = 0.5075%
N = 22 x 12 = 264
PMT remains at 150
2007-04-03 04:44:52 · answer #1 · answered by jacektham 2 · 0⤊ 0⤋
Yes, that's the right answer.
2007-04-02 16:11:56 · answer #2 · answered by dewkisses02 4 · 0⤊ 0⤋
Looks good to me -- it passes sanity check, although I have not run the numbers. I have no quarrel with your analysis.
2007-04-02 16:11:41 · answer #3 · answered by Anonymous · 0⤊ 0⤋
jacektha's answer looks ok to me... ?
2007-04-03 08:54:03 · answer #4 · answered by vintagechic1 3 · 0⤊ 0⤋