At the end of four years — amount 000 put into four- year term deposit paying compounded semi-annually After — 0175 148882 488 81783

The amount of $10 000 is put into a four- year term deposit paying 3.5% compounded semi-annually. After four years the deposit is converted into an ordinary annuity of equal semi-annual payments of $932 each. If the interest rate remains the same, what is the term of the annuity?

SOLUTION

At the end of four years:

PV = 10 000.00; i = 1.75%; n = 8

FV = 10 000.00(1.0175)8 = 10 000(1.148882) = $11 488.81783

Annuity term: