Question: Andrew Kelly is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul

Andrew Kelly is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online,

Andrew has developed the following estimates.

Engine Overhaul ........Probability

Estimated Cash Outflow ....Assessment

$200 ............10%

450 ..............30%

550 ..............50%

750 ..............10%

Instructions

How much should Andrew Kelly deposit today in an account earning 6%, compounded annually, so that he will have enough money on hand in 2 years to pay for the overhaul?

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