Question:
Bill O’Brien would like to take his wife, Mary, on a trip three years from now to Europe to celebrate their
40th anniversary. He has just received a $20,000 inheritance from an uncle and intends to invest it for the
trip.
Bill estimates the trip will cost $23,500 and he believes he can earn 5% interest, compounded annually,
on his investment. Will he be able to pay for the trip with the accumulated investment amount?
Answer:
Bill will not have enough accumulated to take the trip. The future value of his investment of $23,153 is
$347 short of $23,500.
FV = $20,000 (1.15763) = $23,153
Future value of $1: n = 3, i = 5% (from Table 1)
Bill O’Brien would like to take his wife, Mary, on a trip three years from now to Europe to celebrate their
40th anniversary. He has just received a $20,000 inheritance from an uncle and intends to invest it for the
trip.
Bill estimates the trip will cost $23,500 and he believes he can earn 5% interest, compounded annually,
on his investment. Will he be able to pay for the trip with the accumulated investment amount?
Answer:
Bill will not have enough accumulated to take the trip. The future value of his investment of $23,153 is
$347 short of $23,500.
FV = $20,000 (1.15763) = $23,153
Future value of $1: n = 3, i = 5% (from Table 1)
