An employee has contributed with her employer to a retirement program for 20 years a certain amount twice a year. The contribution earns an interest rate of 10% compounded semi-annually. At the date of her retirement the total retirement benefit is Birr 300,000. The retirement program provides for investment of this amount at an interest rate of 10% compounded semi-annually.  Semi-annual payments will be made for 20 years to the employee or her family in the event of her death. 

Required:

1.   What semi-annual payment should she make?

2.   What semi-annual payment should be made for her?

3.   How much interest will be earned on Birr 300,000 over the 40 years?

Answer rating: 100% (QA)

To calculate the semiannual payment and the interest earned we need to use the formula for the prese... View the full answer