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Chapter 6: Question 7BE (page 302)

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 \(400,000. He estimates that the boat he wants will cost \)300,000 when he retires in 5 years. How much of his inheritance must he invest at an annual rate of 8% (compounded annually) to buy the boat at retirement?

Short Answer

Expert verified

The amount of inheritance at an annual rate of 8% will be $204,174.

Step by step solution

01

Definition of inheriting

Inheritance is defined as the passing down of the assets to individuals after the owner of assets dies.

02

Calculation of inheritance

PV=Amount×Rate=300,000×.68058=$204,174

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