Question

Jason White is planning to save up for a trip to Europe in three years. He will need $8,200 when he is ready to make the trip. He plans to invest the same amount at the end of each of the next three years in an account paying 6 percent. What is the amount that he will have to save every year to reach his goal of $8,200 in three years? (Round answer to 2 decimal places, e.g. 5,275.25.) Cash flows

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Answer #1

$8200 is the future value of money that is needed after 3 years. We have to calculate PMT, which can be done using the excel function PMT,

=pmt(rate,nper,pv,fv)

where,

rate is 6%,

nper is 3 years,

pv is 0,

fv is $8200

=PMT(6%,3,0,8200)

=2575.70

Jason white needs to invest $2575.70 each year for 3 years.

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