Question

You want to set aside some money today in order to present your son with a $25000 trip upon his graduation from high school in three years. If your opportunity cost of capital is 9% per year, how much do you need to set aside? Round your answer to the nearest dollar. $21,094 $16,188 O $18,750 O $19,305
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Answer #1

Future value after 3 years = $25000

Rate of return= 9% ; time period = 3 years

Present value = future value/(1+rate)^time

Present value = 25000/(1+0.09)^3

= 19,304.58

= $ 19,305

Thus, $19,305 is to be invested todoy in order to accumulate tge amt. Of 25,000 at tge end of 3 years.

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