# 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 $250,000 after nine years at a 10 percent annual rate (18 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 ninth year.

a. Determine how much the semiannual payment should be. (Round to whole numbers.)

On the day after the sixth payment is made (the beginning of the fourth year), the interest rate goes up to a 12 percent annual rate, and you can earn a 12 percent annual rate on funds that have been accumulated as well as all future payments into the fund. Interest is to be compounded semiannually on all funds.

b. Determine how much the revised semiannual payments should be after this rate change (there are 12 payments and compounding dates). The next payment will be in the middle of the fourth year. (Round all values to whole numbers.)

Compounding is the process in which an asset's earnings, from either capital gains or interest, are reinvested to generate additional earnings over time. This growth, calculated using exponential functions, occurs because the investment will...

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**Related Book For**

## Foundations of Financial Management

**ISBN:** 978-1259194078

15th edition

**Authors:** Stanley Block, Geoffrey Hirt, Bartley Danielsen