Question

You will make the following investments for a trip around the world: $2,600 today, $4,000 at the end of year two, and $1500 at the end of year five. (A) How much will you have in six years if you can earn 4.2% on your investments? (B) What equivalent amount could you put away today as a lump sum and have the same amount in six years?

Answer 1

a) $9606.53

b) $7505.16

Step-by-step explanation:

Giving the following information:

Investment

$2,600 year 0

$4,000 at the end of year two

$1500 at the end of year five.

i=0,42

A) FV=2600*(1,042^6)= $3328

FV=4000*(1,042^4)= $4715,53

FV=1500*(1,042^1)= $1563

Total= $9606.53

B) We need to find the present value of $9606.53

PV= FV/[(1+i)^n]

PV= 9606.53/1,042^6= $7505.16