Discussion. 1. You are planning to take a spring break trip to Canada during your senior...

Discussion.

1. You are planning to take a spring break trip to Canada during your senior year. The trip is exactly two years away, but you want to be prepared and have enough money when the time comes.

Explain how you would determine the amount of money you will have to save in order to pay for the trip.

2. Identify the steps involved in computing the present value when you have multiple cash flows.

Solutions

Expert Solution

First, determine the current cost it takes to accommodate a trip
Then if historical data is available for the cost we can find the inflation rate of the cost otherwise we can assume the inflation rate of the economy
Once the inflation rate is found then the current cost has to be compounded for two years to reach an expected cost of the trip after two years
That will be the FV of the savings I will be doing. Now, this is an annuity case where a certain amount would be deposited regularly in a savings account that pays a certain interest rate.
The future value formula of annuity is : FV = A*{(1+i)^n - 1}/i , where we have to find A with given n (period of deposit), i = interest rate offered in that saving scheme, FV = future value.

Identify future cash flows
Determine the interest rate on the deposit
Find the cashflow timeline i.e. monthly or quarterly or semi-annually or yearly
Find the effective interest rate according to the timeline
For finding the PV we have to discount each future cash flows with effective interest rate found earlier
Sum of all the PV of all future Cash Flows will be the PV

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

DISCUSSION 1. You are planning to take a spring break trip to Canada your senior year....

DISCUSSION 1. You are planning to take a spring break trip to Canada your senior year. The trip is exactly two years away, but you want to be prepared and have enough money when the time comes. Explain how you would determine the amount of money you will have to save in order to pay for the trip. 2. Identify the steps involved in computing the present value when you have multiple cash flows.

1. You are planning to take a spring break trip to Canada during your senior year....

1. You are planning to take a spring break trip to Canada during your senior year. The trip is exactly two years away, but you want to be prepared and have enough money when the time comes. Explain how you would determine the amount of money you will have to save in order to pay for the trip. 2. Identify the steps involved in computing the present value when you have multiple cash flows.

You are planning to take a spring break trip to Canada your senior year. The trip...

You are planning to take a spring break trip to Canada your senior year. The trip is exactly two years away, but you want to be prepared and have enough money when the time comes. Explain how you would determine the amount of money you will have to save in order to pay for the trip. 2. Identify the steps involved in computing the present value when you have multiple cash flows.

1. You are planning to take a spring break trip to Canada your senior year. The...

1. You are planning to take a spring break trip to Canada your senior year. The trip is exactly two years away, but you want to be prepared and have enough money when the time comes. Explain how you would determine the amount of money you will have to save in order to pay for the trip. 2. Identify the steps involved in computing the present value when you have multiple cash flows. **I hope for a non-repeated answer so...

1. You are planning to take a spring break trip to Canada your senior year. The...

During spring break, students have an elasticity of demand for a trip to Florida of -3,...

During spring break, students have an elasticity of demand for a trip to Florida of -3, while senior citizens have an elasticity of demand for a trip to Florida of -6. What pricing insight does this give to the airline companies? Group of answer choices Charge a lower price to the senior citizens because they have a relatively more elastic demand. Charge a lower price to the students because they have a relatively more inelastic demand. Charge a higher price...

You are planning a trip to go see relatives for the Holiday Break. You know your...

You are planning a trip to go see relatives for the Holiday Break. You know your relatives live in a city which is 250 km away. If you can average a speed of 60 mile per hour, how long will you need to plan to get there? a) 15000 minutes b) 4.2 hr c) 9300 sec d) 160 minutes

On a trip home during the summer break, you pay your Uncle Davea visit at...

On a trip home during the summer break, you pay your Uncle Dave a visit at his record store. When you walk in, you notice there is not one single customer. “I have run this store since the 1980s,” Uncle Dave says with a sigh. “We were the first store in this whole town to sell compact discs! But now, it feels like we’re at least a decade or two behind the times. No one buys records anymore—or even CDs!...

At Spring Break, you decide to take what you have learned in Business Statistics and apply...

At Spring Break, you decide to take what you have learned in Business Statistics and apply it in Las Vegas. You hit the roulette table and you bet on red each time. The probability of winning is approximately 0.47. You bet on red 5 times. Calculate the probability of losing at least 2 times. (Use Binomial Distribution)

Albany High School is planning a field trip for senior students. They expected 100 students to...

Albany High School is planning a field trip for senior students. They expected 100 students to participate in the trip but eventually 130 students join the trip. They planned to charge each student a price of $25 for the trip and spend an expense of $20 per student for the trip. Then, they find that the expense of the filed trip goes up to $30 per student, and they have to increase the price for each student to $40. Budget...

Subjects