You have a bank account that has a 6% interest rate and is compounded semiannually. How much should you deposit today to have $6000 in the account in 5 years with no withdrawal?

Answer 1

FV = P (1 + r / n)^Yn

where P is the starting principal, r is the annual interest rate, Y is the number of years invested, and n is the number of compounding periods per year. FV is the future value, meaning the amount the principal grows to after Y years.

6,000 = P * (1 + 0.06/2)^5*2

6,000 = P * (1.03)^10

P = 4,465