Question 1

a. Lucy would like to have $500,000 in 15 years for her to buy a house. To accumulate this amount, Lucy plan to invest an equal sum in Investment M each year that will earn 8 percent interest compounded semi-annually with the first payment made at the beginning of the year.

Required:

i. calculate the amount Lucy must deposit annually to accumulate this amount?

ii. if Lucy decides to make a large lump-sum deposit today instead of the annual deposits to achieve $500,000 in 15 years, how large should this lump-sum deposit be if the deposit can earn 10 percent interest?