Question

What is the total for your trip in the currency of your destination country?

1 usd = 14682.70 Indonesian rupiah 1818 usd = 26693148.60 Indonesian rupiah

HELP WITH QUESTION 3 AND 4 AND 5

3) Let’s not forget about inflation. What will the estimated total be if you add in 3% each year, for 4 years, for inflation (in US dollars)?: Show Steps. Answer (rounded to the nearest penny):___________________________

4) Let’s come up with a saving plan and figure out how much you will need to deposit monthly in order to save up for the total cost of the vacation (answer from #3). Say, you find a bank that offers 1.25% interest rate compounded monthly, and you want to have the total amount in 4 years (Show all your work and find the monthly deposit required, round answer to 2 decimal places) Required monthly savings to reach your goal: _________________________________

5) How much of this total is interest you earned from your bank? Interest earned: ___________________________________

Answer 1

3)

the cost of trip = 1818 dollars

to calculate the cost after 4 years we use future value formula

FV = c x ( 1 + i)ⁿ

c = cost = 1818

i = inflation rate= 3%

n = no of years = 4

FV = 1818 x ( 1 + 3%)⁴

FV = 2046.18 = 2047

4)

to calculate monthly savings we will use future value of annuity formula

FVA = (c/i) x ( (1+i)ⁿ - 1)

where c = monthly saving

i = interest rate = 1.25%

n = no of months = 4 x 12 = 48

FVA = 2047 from answer 3

2047 = (c/0.0125) x ( (1.0125⁴⁸ - 1)

2047 = c x 65.22

c = 2047/65.22

c= 31.38

5)

future value of an investment = total interest earned + total deposits made

since we made 48 deposits of 31.38,

2047 = interest earned + ( 31.38 x 48)

interest earned = 2047 - 1506.33

interest earned = 541.66