Andrea Shertov dreams of spending an extended holiday in Thailand. If she can sa
ID: 2971454 • Letter: A
Question
Andrea Shertov dreams of spending an extended holiday in Thailand. If she can
save enough money, she wants to have six months to travel with friends. She has
done some research and determined that she would need approximately $1800 in
Canadian currency per month to achieve her dream.
At her current salary, she plans to save $150 at the end of each month, invest-
ing it at 2.8% interest compounded monthly. She hopes to be able to take this trip
three years from now.
(1) If Andrea saves $150 per month for three years, will she have enough to pay
for her trip?
Explanation / Answer
Future value of investment after 3 years = A ((1+i)^n - 1) / i i= 2.8/12 = 0.2333% n= 3*12= 36
= 150 ( 1.002333^36 -1 ) /.002333
= 5626.44
alternate solution for FV with Texas BA II plus calculator
PMT = -150 , I = 2.8/12 = 0.2333 , N = 3 *12 =36 , CPT FV = 5626.44
Amount required for trip = 1800*6 = 10800
So, she would not be able to pay for her trip