For equipment upgrades, a business borrowed $450,000 at an annual rate of 8%, compounded semiannually, for 7 years. What are the semiannual payments? Round your answer to the nearest cent.
A)$18,000.00
B)$21,085.71
C)$42,601.04
D)$27,005.84
E)$336,897.48

Question

For equipment upgrades, a business borrowed $450,000 at an annual rate of 8%, compounded semiannually, for 7 years. What are the semiannual payments? Round your answer to the nearest cent. ​
A)$18,000.00
B)$21,085.71
C)$42,601.04
D)$27,005.84
E)$336,897.48

Quizplus · Accepted Answer

To find the semiannual payments, we use the formula for an ordinary annuity: P = [r*PV] / [1 - (1 + r)^-n], where P is the payment, r is the interest rate per period, PV is the present value, and n is the total number of payments. Here, r = 0.08/2 = 0.04, PV = $450,000, and n = 7*2 = 14. Plugging in these values, we get P = [0.04*450,000] / [1 - (1 + 0.04)^-14] = $42,601.04.

For Equipment Upgrades, a Business Borrowed $450,000 at an Annual