2. You want to buy a big boat when you retire. You anticipate needing $130,000 to...

Question

Question

Answer 1

Answer #1

PT a Investment = Present value of amount required in future

= Amount required in future/(1+r)ⁿ

r = rate of interest i.e. 5.1*3/12 i.e.1.275% compounded quarterly

n = period i.e.20*4 i.e. 80

Investment =130000/(1.01275)⁸⁰ i.e. 47180.57

PT b Future value =Present value *(1+r)ⁿ

= 47180.57(1.032906)⁸⁰ i.e.155255.35

Money left =Amount earned - Amount required

= 155255.35-130000 i.e.25255.35

PT c

Investment = Present value of amount required in future

= Amount required in future/(1+r)ⁿ

r = rate of interest i.e. 6*3/12 i.e.1.5% compounded quarterly

n = period i.e.20*4 i.e. 80

Investment =130000/(1.015)⁸⁰ i.e. 39505.72

Answer 2

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