1. Limited time only! Sign up for a free 30min personal tutor trial with Chegg Tutors
    Dismiss Notice
Dismiss Notice
Join Physics Forums Today!
The friendliest, high quality science and math community on the planet! Everyone who loves science is here!

Sum / Annuities question

  1. May 23, 2009 #1
    Find the final value of a plan in which payments of $800 are made every 6 months for 3 years, earning 10% interest compounded semi-annually. The first payment is made in 6 months.

    My Answer:

    R = 800, n = 6 , i = 5%

    A = R[(1-i)^n - 1] / i

    A = 800(1.05^6 - 1) / 0.05

    A = $5441.53

    So I calculated the annuity but I am thrown off by the last sentence. Since the first payment is made in 6 months does this mean that n should really be 5 because he is missing the first 6 months of the year? Or is 6 correct since it is semi-annual for 3 years? I'm just a little tripped up on the wording and started thinking that I am incorrect assuming n = 6 due to the final sentence.

    Last edited: May 23, 2009
  2. jcsd
  3. May 23, 2009 #2


    User Avatar
    Gold Member

    I would say n=6, because he is payed in 6 months time and then again in 6 months after that i.e. twice in the current year. This continues for another two years, for a total of 6 payments.
  4. May 23, 2009 #3
    Great thanks so much. That is what I originally thought but then started to second guess myself.
Know someone interested in this topic? Share this thread via Reddit, Google+, Twitter, or Facebook

Similar Threads - Annuities question Date
Set notation question Mar 8, 2018
Annuity problem Jun 24, 2017
Annuity problem in Finance Jun 11, 2017
Interest Theory- Annuity Withdrawals Jul 30, 2014
Annuity word problem Sep 9, 2013