Question

oter 5 Quiz 6 Submitted 8/30 Total points awarded Help Exit Bill O'Brien would like to take his wife, Mary, on a trip three years from now to Europe to celebrate their 40th anniversary. He has just received a $26,000 inheritance from an uncle and intends to invest it for the trip. Bill estimates the trip will cost $30,000 and he believes he can earn 4% interest, compounded annually, on his investment. (EV of $1. PV of $1. EVA of $1. PVA of $1. EVAD of $1 and PVAD of $1) (Use oppropriate factor(s) from the tables provided.) Complete the following table to calculate the future value. Will he be able to pay for the trip with the accumulated investment amount? (Round your final answers to nearest whole dollar amount.) awarded pred Table or calculator function: Present Value: n3D Future Value Will he be able to pay for the trip? < Prev. ... 4 of 15 Next >

Answer 1

Future value = PV x (1 + r)ⁿ

Where, PV = 26,000, r = 4%, n = 3

Future Value = 26,000 x (1.04)³

= 26,000 x 1.1249 = $29,247.

Bill O'Brien will not be able to pay for trip with the accumulated Investment amount because he will receive $29,247 which is less than cost of trip i.e. $30,000.