Marti plans to save $2,000, $2,500, and $3,000, respectively, starting one year from today. You want...
Marti plans to save $2,000, $2,500, and $3,000, respectively, starting one year from today. You want to have as much money as Marti does three years from now but you plan to make one lump sum investment today. What amount must you save today if you both earn 4.65 annually?
Homework Answers
| Present value of savings of Marti: | ||||||
| Year | savings | PVF at 4.65% | Present value | |||
| 1 | 2000 | 0.955566 | 1911.13235 | |||
| 2 | 2500 | 0.913107 | 2282.76678 | |||
| 3 | 3000 | 0.872534 | 2617.60166 | |||
| Present value of savings of Marti: | 6811.5 | |||||
| Hence, we have to invest $ 6811.50 today to have the same return | ||||||
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