John Fillmores lifelong dream is to own his own fishing boat to use in his retirement. John

QUESTION

John Fillmores lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $400,000. He estimates that the boat he wants will cost $300,000 when he retires in 5 years. How much of his inheritance must he invest at an annual rate of 12% (compounded annually) to buy the boat at retirement? EXERCISE S
We need to find the PV of the investment to be made so that the FV is $300,000 at 12% for 5 years. PV = FV / (1 + r)^n PV = $300,000 / (1.12)^5 PV =

.06 is the amount John must invest today at 12% for 5 years to be able to buy the boat at his retirement.

ANSWER:

CLICK REQUEST FOR  AN EXPERT SOLUTION