Question

# You are planning to do a Sierra Club Machu Picchu Eco-Lodge Trek in 6 years with...

You are planning to do a Sierra Club Machu Picchu Eco-Lodge Trek in 6 years with your college roommate. The trip costs \$13,000. You currently have \$7,000 in your bank account and deposit an additional \$800 every year beginning one year from today. What interest rate would be required if you are to have \$13,000 in your bank account in 6 years?

#### Homework Answers

Answer #1

Solution :-

We Required after 6 Years Money = \$13,000

Now We Deposit today ( Year 0 ) = \$7,000

Therefore Cash Outflow at Year 0 = \$7,000

Cash Outflow at Year 1 to 5 = \$800

In Year 6 Cash Outflow = \$800

Cash Cash inflow ( Required Amount ) = \$7,000

Therefore Net Cash Inflow in Year 6 = \$7,000 - \$800 = \$6,200

Therefore interest Rate Required = 2.12%

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