Answer
The semiannual deposits necessary to accumulate that amount are equal to $3,795.44.
Work Step by Step
1. The payment formula for a sinking fund is:
$PMT = FV\frac{i}{(1+i)^n-1}$
Where:
$FV = 20,000$
** Semiannually = 2 times per year: m = 2
$i = \frac{r}{m}= \frac{0.0525}{2}$
$n = mt = 2 * 2.5 = 5$
So: $PMT = (20,000)\frac{\frac{0.0525}{2}}{(1 + \frac{0.0525}{2})^{5} - 1} = 3,795.44$
