Question

To fund your dream around-the-world vacation, you plan to save $2,575 per year for the next 13 years starting one year from now. If you can earn an interest rate of 5.41 perce how much will you have saved for your vacation? Multiple Choice Ο $46,818.51 Ο $45,204.08 Ο $44,395.65 Ο $44,782.92 Ο $41,972.78

Answer 1

The amount that we have saved for the vacation is computed as shown below:

Future value = Present value x (1 + r)n

= $ 2,575 x 1.054112 + $ 2,575 x 1.054111 + $ 2,575 x 1.054110 + $ 2,575 x 1.05419 + $ 2,575 x 1.05418 + $ 2,575 x 1.05417 + $ 2,575 x 1.05416 + $ 2,575 x 1.05415 + $ 2,575 x 1.05414 + $ 2,575 x 1.05413 + $ 2,575 x 1.05412 + $ 2,575 x 1.05411 + $ 2,575

= $ 46,818.51 Approximately

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