A college professor won $85,000 in the state lottery; income taxes will take about half the amount.

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A college professor won $85,000 in the state lottery; income taxes will take about half the amount. She plans to spend her sabbatical year on leave from the university on an around-the-world trip with her husband, but she must continue to teach 3 more years first. She estimates the trip will cost $40,000 and they will spend the money as a continuous flow of funds during their year of travel. She will put enough of her lottery winnings in a bank account now to pay for the trip. The bank pays 7% nominal interest, compounded continuously. She asks you to compute how much she should set aside in the account for the trip.

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