f a bank pays 5% compounded semi-annually, how much should be deposited now to have $1500 in 4 years from now?

Answer 1

In this example we need the present value of the $1500 we want at the end of 4 years. Here effective rate r = 5%/2 = 2.5% (since we compound semi-annually, we divide the annual rate by 2). Also effective number of periods (n) is 4 * 2 = 8 (again multiplying by 2 the number of years 4).

So amount to be deposited today = 1500/(1+r)^n = $1231