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Determine how much the semi-annual payment should be

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Reference no: EM132518067

You are the chairperson of the investment retirement fund for Actors Fund. You are asked to set up a fund of semi-annual payments to be compounded semi-annually to accumulate a sum of Sh.5, 000,000 after 10 years at 8% annual rate (20 payments). The first payment into the fund is to take place 6 months from now, and the last payment is to take place at the end of the tenth year.

Question A) Determine how much the semi-annual payment should be.

Question B) On the day after the sixth payment is made (the beginning of the fourth year), the interest rate goes up to 10% annual rate, and you can earn 10% on the funds that have accumulated as well as on all future payments into the fund. Interest is to be compounded semi-annually on all funds. Determine how much the revised semi-annual payments should be after this rate change (there are 14 semi-annual payments remaining). The next payment will be in the middle of the fourth year.

Reference no: EM132518067

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