Ed long promised to pay is son $400 semiannually for 12 years. Assume Ed can invest his money at 6 % in an ordinary annuity. How much must Ed invest today to pay his son $400 semiannually for 12 years?

Answer 1

i = .06/2 = .03
n = 24
Present value = 400(1 - 1.03^-24)/.03
= ....

you do the button-pushing

Answer 2

12 years x2 =24periods

6%/2=3%

24 periods @3%

400 x 16.9355= $6,774.20