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Ten years from now, you plan on taking a year's unpaid vacation to sail from Hawaii to Australia. You estimate that expenses, e.g., boat, crew, provisions, etc., will be $5000 per month over the 12-month journey. The APR is 8.4%, compounded monthly. Assume that each payment is made at month’s end.

(a) How much money will you need in the bank at the start of the trip in order to withdraw $5000 per month for expenses?

(b) What lump sum should you deposit in the bank today so that you will have enough money ten years from now for your trip?

(c) The lump sum deposit in part (b) is out of the question given your current financial state. Instead, you believe that a systematic monthly savings plan is better. How much should you deposit monthly to insure sufficient funds in ten years for your trip?

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Financial Management, Finance

Category:- Financial Management
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