Question

you plan on taking a cruise every 2 years, starting a year from now and ending in 41 years (i.e., cruises at t = 1, 3, 5, …, 41). you expect each cruise to cost $3,000. how much do you need to deposit today, in an account that pays 10%, annual compounding, to fund these vacation plans?what is the IRR on a project that requires an initial investment of $100 million (at t = 0) and will generate a single expected cash flow of $161.05 million in 5 years (at t = 5)?

Answer 1

To have $10,000 in ten years in an account that pays 10% interest compounded annually, you need to deposit $3,874.77.

Step-by-step explanation:

The question is asking how much money needs to be deposited in a bank account that pays 10% interest compounded annually in order to have $10,000 in ten years. To find this, we can use the formula for compound interest: A = P(1+r/n)^(nt), where A is the final amount, P is the principal amount (the initial deposit), r is the annual interest rate, n is the number of times that interest is compounded per year, and t is the number of years.Given that the desired amount is $10,000, the interest rate is 10% (or 0.10), and the number of years is 10, we need to solve the equation: 10,000 = P(1+0.10/1)^(1*10).By solving for P, we find that the principal amount needs to be $3,874.77.