10. You are going to retire after exactly three years and you plan to take a...
10. You are going to retire after exactly three years and you plan to take a world cruise after retirement for which you will require $20,000. What is the lowest amount that you must set aside today at an interest rate of 8 percent so that you can take the cruise?
Homework Answers
We are given the following information:
| Amount to be set aside today | PV | To be calculated |
| Rate of interest | r | 8.00% |
| number of years | n | 3 |
| Future value | FV | $ 20,000.00 |
We need to solve the following equation to arrive at the required FV:
So he need to set aside 15876.64 today to have 20000 in 3 years
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