A company has had record profits and decided to use some of the profits to pay for manufacturing improvements. If the company can invest $1,600,000.00 in an a annuity will that will make payments at the beginning of every six months for 4 years. If the annuity pays 5.6%, compounded semi-annual. What is the size of payments that the company can expect? The payment amount will be $. (Round to 2 decimal places.)

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A:

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Q: ompound intere

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A: Hi there, Thanks for posting the questions. As per our Q&A guidelines, the solution for first…

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A: Please refer to the image below for hand written solution.

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A: Future value FACTOR ANNUITY =(1+r)n - 1/r r=interest rate =4% Period =15 years

Present Value

Present value (PV) is defined as the current or present value of all future sums of cash flow or money at a specified rate of return. This rate of return is known as the discounted rate, which is essentially the interest rate, discounted over some time. The expected cash flows are discounted at a discount rate to compute the present value. The higher the discount rate, the higher the future value (FV), but the lower the present value.