9-49 Exercise 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. Tehn 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 as follows:

a. 5% compounded annually

b. 10% compounded annually

c. 20% Compounded annually

1. You want to spend $5,000 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?

a. 5% compounded annually

b. 10% compounded annually

c. 20% Compounded annually