How much money should be deposited today in an account that earns 3% compounded semiannually so that it will accumulate to $9000 in 3 years?
I have done it like this, 9000/(1+(.03/6))^6*3 and it gave me the answer $8227.23 but it says the correct answer is $8230.88 and I cannot find out how they came up with that answer.
Good effort!!
The mistake you made though was the number of compounding periods, per year. The deposit is being
compounded SEMIANNUALLY, meaning TWICE per year. However, you have 6 (six) annual compounding periods.
Hence, the equation should be: .
You should then obtain the correct value for P, or present value of $8,230.88.
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