40th anniversary. He has just received a $28,000 inheritance from an uncle and i

Question

40th anniversary. He has just received a $28,000 inheritance from an uncle and intends to invest it for the trip. Bill estimates the trip will cost $36,400. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tables provided.)

  

What interest rate, compounded annually, must Bill earn to accumulate enough to pay for the trip?

40th anniversary. He has just received a $28,000 inheritance from an uncle and intends to invest it for the trip. Bill estimates the trip will cost $36,400. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1)(Use appropriate factor(s) from the tables provided.)

Future value of $1 Future Value of a Ordinary Annuity of $1 Future Value of an Annuity Due of $1 Present Value of $1 Present Value of an Ordinary Annuity of S1 Present Value of an Annuity Due of $1

Explanation / Answer

36400 = 28000*(1+i)^3

i= 9.14%

Using the FV of $1 chart, solve for i Present Value: 28,000 n = 3 i = Future Value - 36,400

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