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erik [133]
3 years ago
11

You wish to buy a cabin in 15 years. TODAY, the cabin costs $150,000. You believe the price of the cabin will inflate at 4% annu

ally. You want to invest a single amount of money (lump sum) today and have the money grow to equal the future purchase price of the cabin 15 years from now. If you can earn 10% annually on your investments, how much do you need to invest NOW, in order to be able to purchase the cabin?
Business
1 answer:
vfiekz [6]3 years ago
5 0

Answer:

I will need to invest 64,669.73 dollars now.

Explanation:

We will calcualte the future value of the cabin considering the inflation:

Principal \: (1+ inflation )^{time} = Amount

Principal 150,000.00

time  15 years

inflation 0.04000

150000 \: (1+ 0.04)^{15} = Amount

Amount 270,141.53

Then we calculate the present value of the lump sum at 15 years discounted at 10% which is the yield of the funds

\frac{Maturity}{(1 + rate)^{time} } = PV  

Maturity  270,141.53

time   15 years

rate  0.10

\frac{270141.53}{(1 + 0.1)^{15} } = PV  

PV   64,669.73

we would need to deposit 64,669.73 today to get enough cash to purchase the bcabin in 15 years.

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Answer:

The balance in the account = $851.8

Explanation:

The future value of a lump sum is the amount expected at a future date when a sum of money is invested today at a particular rate of interest for certain number of years

.

This implies compounding the initial amount invested ($300) at the given interest rate(11%) for 10 years.This will be done as follows:

<em />

FV = PV × (1+r)^(n)

FV-Future value

r- rate of return per period

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FV- ?

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n- 10

FV= 300 × 1.11^10 = 851.83

The balance in the account = $851.8

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Answer:

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Explanation:

The computation of the value of operations after the repurchase is shown below:-

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We simply applied the above formula so that the firm's value of operations after the repurchase could come

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3 years ago
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The answer for your problem is a
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A shoe company's ads feature the members of a popular country music band. Product sales increase significantly among the band's
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