You have just won a lawsuit and, as part of the judgement, you will be receiving semi-annual payments of $20,000 over the next ten years.

You have just won a lawsuit and, as part of the judgement, you will be receiving semi-annual payments of $20,000 over the next ten years. The first payment will occur six months from today. You plan on investing these payments and you expect to earn a return of 5% p.a. compounded on a monthly basis. The future value of this investment at the end of its time horizon is closest to:

$409,761.

$510,893.

$503,116.

$512,242.

Solutions

Expert Solution

The effective half yearly rate compounded monthly = (1+0.05/12)^6-1 =	2.5262%
FV = 20000*(1.025262^20-)/0.025262 =	$ 5,12,243
Answer: $512,242 [Difference in solution due to approximation]

jeff jeffy answered 1 year ago

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