Question
Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 6 years to overhaul the
Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 6 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 6 years, by conducting some research online, Newman has developed the following estimates.
Engine Overhaul Estimated Cash flow | probability assessment |
$380 | 10% |
450 | 30% |
810 | 50% |
800 | 10% |
How much should Bowie deposit today in an account earning 6%, compounded annually, so that he will have enough money on hand in 6 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to 0 decimal places, e.g. 458,581.)
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