Shane wants to invest money in a 6% CD account that compounds semiannually. Shane would like the account to have a balance of $100,000 four years from now. How much must Shane deposit to accomplish his goal?
A)$88,848.
B)$78,941.
C)$25,336.
D)$22,510.PV = $100,000 x .78941* = $78,941 *PV of $1: n=8; i=3%

Question

Quizplus · Accepted Answer

We can use the formula for future value of a single sum with semiannual compounding to solve for the deposit amount: FV = PV(1+(r/n))^(nt), where FV=$100,000, r=6%, n=2 (since compounding is semiannual), and t=4. Solving for PV, we get PV=FV/(1+(r/n))^(nt)= $78,941. Therefore, Shane must deposit $78,941 to accomplish his goal. Answer B is the correct choice.

Shane Wants to Invest Money in a 6% CD Account