Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. gretchen wants to take the next six years off work

Gretchen wants to take the next six years off work to travel around the world. She...

Free

50.1K

Verified Solution

Question

Accounting

Gretchen wants to take the next six years off work to travelaround the world. She estimates her annual cash needs at $29,000(if she needs more, she will work odd jobs). Gretchen believes shecan invest her savings at 10% until she depletes her funds.

Requirements:

1. How much money does Gretchen need now to fund hertravels?

2. After speaking with a number of banks, Gretchenlearns she will only be able to invest her funds at 6%. How muchdoes she need now to fund her travels?

Answer & Explanation Solved by verified expert
3.8 Ratings (677 Votes)

1.

To find out how much money she requires now to fund her travels, we need to find out the present value of $ 29,000 each year for the next 6 years

Year Amount PV Factor Present Value
1 / (1 + 10%)^Year
1 $ 29,000.00                          0.909 $      26,363.64
2 $ 29,000.00                          0.826 $      23,966.94
3 $ 29,000.00                          0.751 $      21,788.13
4 $ 29,000.00                          0.683 $      19,807.39
5 $ 29,000.00                          0.621 $      18,006.72
6 $ 29,000.00                          0.564 $      16,369.74
$    126,302.56

2. If interest rate is 6%

Year Amount PV Factor Present Value
1 / (1 + 6%)^Year
1 $ 29,000.00                          0.943 $      27,358.49
2 $ 29,000.00                          0.890 $      25,809.90
3 $ 29,000.00                          0.840 $      24,348.96
4 $ 29,000.00                          0.792 $      22,970.72
5 $ 29,000.00                          0.747 $      21,670.49
6 $ 29,000.00                          0.705 $      20,443.86
$    142,602.41

Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Advance Math
1.2K views

Hi, can you please verify with the basic code of a beginner MATLAB user, and try...

Biology
1.2K views

COVID-19 What do you learn of it, How protect my selves, and What is most important...

Medical Sciences
1.2K views

In order to lose weight, a person must be ________________. balancing their energy input with energy...

Biology
1.2K views

Consider the image below solute particle In this situation which of the following will occur...

Physics
1.2K views

For a system to be in equilibrium the torques acting on it must balance This...

Algebra
1.2K views

nd the values x and x2 that maximize f x x 6x 5x2 subject to...

Algebra
1.2K views

Suppose that 5 customers arrive, and each orders a different appetizer to share from a...

Algebra
1.2K views

7 2x 3y 5x 3 16 3x 6x A C 9 A 5n 5n n...

Accounting
1.2K views

Flaherty is considering an investment that if pald for immediately, is...

Accounting
1.2K views

pla solve it fast and it has two parts but its the same question pls...

Accounting
1.2K views

110 Ps-1. The adjusted tetal Balance Age 30, 2023. Selections. Prepare the four doing and...

Finance
1.2K views

It would be great if you could show the steps (not on excel) for better...