Question

Score: 0 of 1 pt 14 of 19 (2 complete) HW Score: 10.53%, 2 of 19 E26-21 (similar to) Question Help Helen wants to take the next four years off work to travel around the world. She estimates her annual cash noods at $35,000 of she needs more, she will work odd jobs). Helen believes she can invest her savings at 10% until she depletes her funds. (Click the icon to view the Present Value of $1 table.) (Click the icon to view the Present Value of Annuity of $1 table.) (Click the icon to view the Future Value of $1 table.) (Click the icon to view the Future Value of Annuity of 51 table.) Requirements 1. How much money does Helen need now to fund her travels? 2. After speaking with a number of banks, Helen leams she will only be able to invest her funds at 4%. How much does she need now to fund her travels? Requirement 1. How much money does Helen need now to fund her travels? (Round your answer to the nearest whole dollar) With the 10% interest rate, Helen needs $

Answer 1

Answer to Requirement 1:

Annual Cash Required = $35,000
Interest Rate = 10%
Time Period = 4 years

Amount Deposited = $35,000 * Present Value of Annuity of $1 (10%, 4)
Amount Deposited = $35,000 * 3.170
Amount Deposited = $110,950

With the 10% interest rate, Helen needs $110,950.

Answer to Requirement 2:

Annual Cash Required = $35,000
Interest Rate = 4%
Time Period = 4 years

Amount Deposited = $35,000 * Present Value of Annuity of $1 (4%, 4)
Amount Deposited = $35,000 * 3.630
Amount Deposited = $127,050

With the 4% interest rate, Helen needs $127,050.

If Helen’s savings are earning a lower interest rate (4), she will need to save $127,050 to be able to withdraw $35,000 per year.