Answer
The present value of the investment must be equal to $9,258.32
Work Step by Step
The formula for the present value of an annuity is:
$PV = PMT\frac{1 - (1+i)^{-n}}{i}$
Where:
$PMT = 2,000$
** The withdrawals are made semiannualy, so m = 2.
$i = r/m = \frac{0.0525}{2}$
$n = mt = 2 * 2.5 = 5$
So:
$PV = (2,000)\frac{1- (1 + \frac{0.0525}{2})^{-5}}{\frac{0.0525}{2}} = 9,258.32$
