Solve the problem. Round to the nearest cent. Tabby Soft believes that it will need new equipment in 5 years. The equipment will cost $26,000. What lump sum should be invested today at 6%, compounded semiannually, to yield $26,000?

Question

Erica Dillon

Mathematics

4 March, 02:05

Solve the problem. Round to the nearest cent. Tabby Soft believes that it will need new equipment in 5 years. The equipment will cost $26,000. What lump sum should be invested today at 6%, compounded semiannually, to yield $26,000?

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Answers (1)

Know the Answer?

Pierre Cherry · Answer 1

Hi there

The formula of compound interest is

A=p (1+r/k) ^kt

A future value 26000

P present value?

R interest rate 0.06

K compounded semiannual 2

T time 5 years

We need to solve for p

P=A: (1+r/k) ^kt

So

P=26,000: (1+0.06:2) ^ (2*5)

P=19,346.44

Good luck!