In: Finance
(1 point) Barbara makes a sequence of 28 semiannual deposits of the form X,2X,X,2X,…into an account paying a rate of 7.2 percent compounded annually. If the account balance 5 years after the last deposit is $8050, what is X?
Solution :-
Semiannual Rate = ( 1 + 0.072 )1/2 - 1 = 0.03537 = 3.537%
As there are 28 Semiannual Deposits
Now Divide X and 2X by X , we get 1 and 2
now find future Worth at the end of 28 Semiannual Deposits
Now Multiply X then we get = 69.4272 X
Now after 5 Years Value = $8,050
= 69.4272 X * ( 1 + 0.072 )5 = $8,050
= 69.4272 X * 1.4157 = $8,050
X = $8,050 / 98.2887
X = $81.90
Therefore the Value of X = $81.90
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