You are chairperson of the investment fund for the Continental Soccer League. You are asked to set
Question:
You are chairperson of the investment fund for the Continental Soccer League. You are asked to set up a fund of semiannual payments to be compounded semiannually to accumulate a sum of $230,000 after ten years at a 14 percent annual rate (20 payments). The first payment into the fund is to take place six months from today, and the last payment is to take place at the end of the tenth year. Determine how much the semiannual payment should be.
On the day after the sixth payment is made (the beginning of the fourth year), the interest rate goes up to an annual rate of 16 percent. This new rate applies to the funds that have been accumulated as well as all future payments into the fund. Interest is to be compounded semiannually on all funds. Determine how much the revised semiannual payments should be after this rate change (there are 14 payments and compounding dates). The next payment will be in the middle of the fourth year.
Foundations of Financial Management
ISBN: 978-1259194078
15th edition
Authors: Stanley Block, Geoffrey Hirt, Bartley Danielsen