Kevin Winthrop is saving for an Australian vacation in three years. He estimates that he will need $5,000 to cover his airfaire and all other expenses for a weeklong holiday in Australia. If he can invest his money in an S & P 500 equity index fund that is expected to earn an average annual return of 10.3 percent over the next three years, how much will he have to save every year if he starts saving at the end of this year?

Calculate the annual payment as follows: Future value = Annual payment*(((1+Rate)^years)-1)/ Rate

Answered: Kevin Winthrop is saving for an…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 35P

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Kevin Winthrop is saving for an Australian vacation in three years. He estimates that he will need $5,000 to cover his airfaire and all other expenses for a weeklong
holiday in Australia. If he can invest his money in an S & P 500 equity index fund that is expected to earn an average annual return of 10.3 percent over the next three years,
how much will he have to save every year if he starts saving at the end of this year?

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