"Assuming that your estimated total cost will grow by 2.5% per year (due to inflation), demonstrate...

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"Assuming that your estimated total cost will grow by 2.5% peryear (due to inflation), demonstrate how you would compute theexpected future cost of your dream vacation.
Suppose that you can invest money every month into a fee-freemutual fund and that this fund is expected to have a 10% nominalannual rate of return. Using your estimated future cost (includinginflation) as a future value, determine the amount of money youmust save each month for the next 10 years (i.e., 120 months) toachieve your goal. Then, determine the monthly amount you must saveif you delay your trip for an additional 5 years (that is, you willtake the trip 15 years from today = 180 months) instead of 10 yearsfrom today. (Note: Be sure to add the 5 additional years ofinflation to the estimated future cost.)"
I have identified the total cost of my vacation for $1287.

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4.3 Ratings (662 Votes)

1 Let us assume I am allocating 10000 for my dreamtrip to go after 10 years Given that inflation rate as25 using excel function See Answer

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"Assuming that your estimated total cost will grow by 2.5% peryear (due to inflation), demonstrate how you would compute theexpected future cost of your dream vacation.Suppose that you can invest money every month into a fee-freemutual fund and that this fund is expected to have a 10% nominalannual rate of return. Using your estimated future cost (includinginflation) as a future value, determine the amount of money youmust save each month for the next 10 years (i.e., 120 months) toachieve your goal. Then, determine the monthly amount you must saveif you delay your trip for an additional 5 years (that is, you willtake the trip 15 years from today = 180 months) instead of 10 yearsfrom today. (Note: Be sure to add the 5 additional years ofinflation to the estimated future cost.)"I have identified the total cost of my vacation for $1287.