John Fillmore’s lifelong dream is to own his own fishing boat to use in his retirement. John has recently come into an inheritance of $409,900. He estimates that the boat he wants will cost $327,300 when he retires in 5 years. (Use the tables below.) Assuming quarterly compounding of amounts invested at 12%, how much of John Fillmore’s inheritance must be invested to have enough at retirement to buy the boat?(Round factor values to 5 decimal places, e.g. 1.25124 and final answers to 0 decimal places, e.g. 458,581.)
Answer : John Fillmore’s inheritance must be invested to have enough at retirement to buy the boat =$ 185719.8
Working notes for the above answer
We have provided with the information as follow
John has recently come into an inheritance of $409,900
boat he wants will cost $327,300 when he retires in 5 years.
Assuming quarterly compounding of amounts invested at 12%,
We will find out Prasent value factror @ 12 % for 5 years nad it is = 0.56743
PV= $327,300 * 0.56743
=$ 185719.8
