Question

In: Finance

Suppose you plan to backpack around Europe after you graduate from the university in 4 years...

Suppose you plan to backpack around Europe after you graduate from the university in 4 years (t=4). You have estimated it will cost you $15,000 to pursue your dream. How much do you need to invest into a saving account today (t=0) to reach your goal in 4 years? Assume your saving account earns 6% per annum. Round your answer to three decimal places.

a.

$13,349.946

b.

$12,358.959

c.

$11,881.405

d.

$13,350.946

e.

$11,208.872

Solutions

Expert Solution

PV = FV / (1+r) ^n

= $15,000 / (1+6%) ^4

= $15,000 / 1.06^4

= $11,881.405

The amount you need to invest today =  $11,881.405


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