Answer to Question #216713 in Financial Math for Sherri

Question

Southwest Dry Cleaners believes that it will need equipment in 10 yeas. The equipment will cost 26,000. What lump sum should be invested today at 6% compounded semiannually to yield $26,000?

Answer 1

$A=P(1+\frac {r} {n}) ^{nt}$

$P=\frac {A} {(1+\frac {r} {n}) ^{nt} }$

$P=\frac {26000}{(1+\frac {0.06} {2}) ^{(10×2)}}$

$P=\frac {26000}{(1+0.03)^{20}}$

$P=\$14,395.57$