Exercises in Compound Interest Study Appendix 9. Then answer the following questions: 1. It is your sixtieth birthday. You plan to work 5 more years before retiring. Then you want to spend $20,000 for a Mediterranean cruise. What lump sum do you have to invest now to accumulate the $20,000? Assume your minimum desired rate of return is:

a. 5%, compounded annually

b. 10%, compounded annually

c. 20%, compounded annually 2. You want to spend $3,000 on a vacation at the end of each of the next 5 years. What lump sum do you have to invest now to take the five vacations? Assume that your minimum desired rate of return is:

a. 5%, compounded annually

b. 10%, compounded annually

c. 20%, compounded annually