The above question is related to the future value of an amount saved at regular intervals.
We need to find the future value of the $ 420 saved every six month which are compounded semi-annually.
When the compounding is semi-annually, the same is divided by 2 and the time is multiplied by 2.
The future value will be calculated as -
Future value = $ 420 × FVIFA for 30 years @ 5 %
Here, the annual rate was 10 % but since compounding is semi-annually, thus it is divided by 2. Similarly, time is multiplied by 2 i.e 15 years X 2 = 30 periods
Referring the FVIFA table, we got -
FVIFA for 30 years @ 5 % = 66.4388
Future value = $ 420 × 66.4388 = $ 27,904.30
