Suppose you plan to backpack around Europe after you graduate from the university in 4 years (t=4)

Finance Oct 27, 2020

Suppose you plan to backpack around Europe after you graduate from the university in 4 years (t=4). You have estimated it will cost you $15,000 to pursue your dream. How much do you need to invest into a saving account today (t=0) to reach your goal in 4 years? Assume your saving account earns 6% per annum. Round your answer to three decimal places.

	a.	$13,349.946
	b.	$12,358.959
	c.	$11,881.405
	d.	$13,350.946
	e.	$11,208.872

Expert Solution

PV = FV / (1+r) ^n

= $15,000 / (1+6%) ^4

= $15,000 / 1.06^4

= $11,881.405

The amount you need to invest today = $11,881.405

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