Investment fund for the eastern football league

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You are chairperson of the investment fund for the Eastern Football League. You are asked to set up a fund of semiannual payments to be compounded semiannually to accumulate a sum of $100,000 after 10 years at an 8 percent annual rate (20 payments). The first payment into the fund is to occur six months from today, and the last payment is to take place at the end of the 10th year.

a. Determine how much the semiannual payment should be. (Round to whole numbers.)

On the day after the fourth payment is made (the beginning of the third year) the interest rate will go up to a 10 percent annual rate, and you can earn a 10 percent annual rate on funds that have been accumulated as well as all future payments into the fund. Interest is to be compounded semiannually on all funds.

b. Determine how much the revised semiannual payments should be after this rate change (there are 16 payments and compounding dates). The next payment will be in the middle of the third year. (Round all values to whole numbers.)

Reference no: EM131222392

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