How much must Glenda deposit?

Glenda wants to purchase a $10,000 vehicle in 4 years. She can earn 6% compounded semi-annually at her bank. How much must Glenda deposit at the beginning of the year to have $10,000 in 4 years?
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1 Answer

4 years is 8 6-month periods at 6/2=3% every 6 months. The growth rate is 1.038=1.26677 approx.

So the amount to be invested now is 10000/1.26677=$7,894.09. In 4 years this will grow to $10,000.

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