Amount wanted after 3 years is 300,000 and 500,000 after 5 years. Find present value of p when 12peecent interest is compounded bimonthly.

Answer 1

1. P = Po*(1+r)n.

Po = $300.000.

r = 0.12/12 * 2mo. = 0.02 = Bi-monthly % rate expressed as a decimal.

n = 6comp./yr. * 3yrs. = 18 Compounding periods.

300,000 = Po(1+0.02)^18.
Po = 300,000/1.02^18 = $210,048.

2. Same procedure as #1 except for 5 yrs. and $500,000.