Question 25 1 point You decide to save for your dream vacati

Question 25 (1 point) You decide to save for your dream vacation to Europe (London, Paris, and Rome) You want to be able to travel in 5 years. If you believe your trip will cost $8,000 and you can earn 6 percent annual interest on your savings, how much must you deposit today so you can afford your trip in 5 years? $6,289 None of these are correct. $5,402 $6,432 $5,978 Save

Solution

Future Value = Present Value * ( 1+ Rate of Interest ) ^ Time Period

$ 8,000 = Present Value * ( 1+6%) ^ 5

$ 8,000 = Present Value * (1.06) ^ 5

$ 8,000 / 1.338225578 = Present Value

Present Value = 5,978.065383

= 5,978.07

Hence, the correct answer is $ 5,978