# [SOLVED] Simple Annuities

• Dec 6th 2009, 09:41 AM
Ife
[SOLVED] Simple Annuities
I just want to see if what I think is the way to answer this is correct. The question reads:

Jackie has made semiannual deposits of $600 for 5 yrs into a savings account that pays $J_{2} = 6.5$%. What semiannual deposit for the next year will bring the fund up to$12,000?
• Dec 6th 2009, 10:09 AM
Wilmer
Quote:

Originally Posted by Ife
I just want to see if what I think is the way to answer this is correct. The question reads:

Jackie has made semiannual deposits of $600 for 5 yrs into a savings account that pays $J_{2} = 6.5$%. What semiannual deposit for the next year will bring the fund up to$12,000?

Well, WHAT is the way you think is correct?

Also, explain what J2 = 6.5 means; 3.25 every 6 months?
• Dec 6th 2009, 10:21 AM
Ife
J2 meaning $\frac {0.065}{2}^{2*n}$ (which i guess may be the same thing you have said, i'm not too sure. n in this case referring to the number of periods of interest conversion periods, of course).

I am thinking that i 1st need to calculate the accumulated amount after the 5 years, which i have got to be $6,958.05. Then i was thinking that i would need to discount the 12000 to present time (which is after the 5yrs), then find the difference and divide that by 2 to calculate the semiannual payment... I dunno if that is near right... when i discounted the 12000, i got 11,256.44, and the difference : 11,256.44-6,958.05= 4,298.39 this amount being the total for the year, so the semiannual payment would be half of that --$2,149.20..

How wrong am i?
• Dec 6th 2009, 01:01 PM
Wilmer
Nope.

FV of 6958.05 (n=2) = 7417.67
12000 - 7417.67 = 4582.33
FV 2252.53 (n=2) = 4582.33

Kapish?
• Dec 6th 2009, 01:28 PM
Ife
Ohh so i compound the accumulated value to the end of the payment, time then work the difference. Ok well at least i was on the right track. That's comforting :) hopefully i can get the hang of these dang computations before my finals next month...(Headbang)(Nerd)