Question

In: Finance

You decide to save for your dream vacation to Europe (London,Paris, and Rome). You want...

You decide to save for your dream vacation to Europe (London, Paris, and Rome). You want to be able to travel in 10 years. If you believe your trip will cost $5,514 and you can earn 5.2 percent annual interest on your savings, how much must you deposit today so you can afford your trip in 10 years?  DO NOT USE DOLLAR SIGNS OR COMMAS IN YOUR ANSWER. ROUND ANSWER TO THE NEAREST DOLLAR.

Solutions

Expert Solution

Vacation cost in 10 years = $5514

Calculating the amount needs to be invested today to able to have vacation cost amount in 10 years:-

Present Value = Future Value/(1+r)^n

Where,

r = Periodic Interest rate = 5.2%

n= no of periods = 10

Present Value =$5514/(1+0.052)^10

= $5514/1.66018848841

Present Value = $3321

So, amount needs to be deposited today is $3321

jeff jeffy answered 2 years ago
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