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A recently graduated mechanical engineer wants to build a reserve fund as a safety net to pay his expenses in the unlikely event that an unexpected emergency arises. His aim is to have $45,000 developed over the next 3 years, with the proviso that the amount must have the same purchasing power as$45,000 today. If the expected market rate on investments is 8% per year and inflation is averaging 2% per year, find the annual amount necessary to meet his goal.
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VerifiedAnswered 2 years ago
Answered 2 years ago
Step 1
1 of 2The future worth (inflation rate = 2% and n = 3 years):
The annual worth in future dollars ( = 8%):
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