1. You have a long-term goal to take a leave of absence to travel around the world on a three-year adventure.
a. Which formula would you use to calculate how much needs to be saved before you can cover the annual expenditure of $100,000 per year on this adventure?
(1) PMT({1 − [1/(1 +
i)
n
]}/i)
(2) PMT{[(1 −
i)
n
− 1]/i}
(3) PMT{[(1 +
i)
n
− 1]/i}
(4) PMT[(1/1 +
i)
n
/i]
b. Using the reference table method, what factor would you use if you were earning a 3% interest rate annually?
(1) 2.829
(2) 3.091
(3) 0.915
(4) 1.093
c. Using a calculator, which values would you use?
(1) N = 3; I/YR = 3; PMT = 100,000
(2) N = 3; I/YR = 3; PMT = −300,000
(3) N = 3; I/YR = 3; PMT = 300,000
(4) N = 3; I/YR = 3; PMT = −100,000
d. How much savings will you need prior to your leave of absence?
(1) $282,861
(2) $309,090
(3) $274,530
(4) $327,810