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Interest and Future Value

Mr. and Mrs. Bush wish to purchase a boat in 8 years when they retire. They are planning to purchase the boat using proceeds from the sale of their property which is currently worth $90,000 and its value is growing at 7 percent a year. The boat is currently worth $200,000 increasing at 5 percent per year. In addition to the value of their property, how much additional money should they deposit at the end of each year in an account paying 9 percent annual interest in order to be able to buy the boat upon retirement?

Solution Preview

First, we calculate the value of the boat after 8 years.
BV = $200,000 * (1+5%)^8 = $295,491.09
Second, we calculate the value of their ...

Solution Summary

Interest and future value are investigated.