You would like to have $4,000 in 55 years for a special vacation following graduation by making deposits at the end of every six months in an annuity that pays 6.56.5 % compounded semiannually. Determine how much you should deposit at the end of every six month.

total amount deposit at end of every 6 month is $445.37

Explanation:

Future value required = 4000

Total 6 months Period in 4 years (n) = 4*2 = 8

Interest rate 6.56% or 0.656 compounded Semiannual

semiannual interest rate (r) = 0.0656/2 = 0.0328

Future value of annuity formula = P * { (1+r) ^n - 1 } / r

4000 = P * (((1+0.0328) ^8) - 1) / 0.0328

4000 = P * 8.98

P = $ 445.37

total amount deposit at end of every 6 month is $445.37