Dave wants to travel around Europe in 2.5 years, when he graduates. He estimates the airfare will cost $1900 and he will need $200 per day for all his expenses.
Dave has just invested $4600 in a GIC earning 4.5% compounded semi-annually. He also has a savings account that earns 6%, compounded monthly but his balance is zero.
Dave plans to travel for 60 days.
A) what is the cost for travelling for 60 days?
13900
B) What is the value of the GIC at the end of the term?
N=
I=
PV=
PMT=
FV=
P/Y=
C/Y=
http://www.meta-financial.com/lessons/compound-interest/formula-calculate.php
To determine the cost of traveling for 60 days, we need to calculate Dave's daily expenses and multiply that by the number of travel days.
Dave estimates that he will need $200 per day for all his expenses. So, the total cost for traveling for 60 days can be calculated as:
Total cost = Daily expenses * Number of travel days
Total cost = $200 * 60 = $12,000
So, the cost for traveling for 60 days is $12,000.
To calculate the value of the GIC at the end of the term, we can use the formula for compound interest:
FV = PV * (1 + r/n)^(n*t)
Where:
FV = Future value
PV = Present value (initial investment)
r = Annual interest rate
n = Number of compounding periods per year
t = Number of years
In this case:
PV = $4600 (the initial investment)
r = 4.5% (annual interest rate)
n = 2 (compounded semi-annually)
t = 2.5 years
Using these values, we can calculate the future value (FV) of the GIC:
FV = $4600 * (1 + 0.045/2)^(2*2.5)
FV = $4600 * (1 + 0.0225)^5
FV ≈ $4600 * 1.1155
FV ≈ $5120.30
So, the value of the GIC at the end of the term is approximately $5120.30.
Please note that the values for N, I, PMT, P/Y, and C/Y were not provided in the question, so they are not applicable for this specific calculation.