Question

Ruth wants to set aside funds to take an around the world cruise in 4 years. Ruth expects that she will need $25500 for her dream vacation. If she is able to earn 9% per annum on an investment, how much will she have to set aside today so that she will have sufficient funds available?

Answer 1

Amount invested (P) = $18,065 (Approx)

Step-by-step explanation:

Given:

Total amount need (A) = $25,500

Number of year (n) = 4

Rate of interest (r) = 9% = 0.09

Find:

Amount invested (P)

Computation:

A = P(1+r)ⁿ

25,500 = P(1+0.09)⁴

25,500 = P(1.41158161)

P = 18,064.8429

Amount invested (P) = $18,065 (Approx)