Question
Newman Bowie is trying to determine the amount to set aside so that he will have enough money on hand in3years to overhaul the engine
Newman Bowie is trying to determine the amount to set aside so that he will have enough money on hand in3years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in3years, by conducting some research online, Newman has developed the following estimates.
Engine Overhaul Estimated Cash Outflow | Probability Assessment | ||
---|---|---|---|
$360 | 10% | ||
550 | 30% | ||
800 | 50% | ||
720 | 10% |
How much should Newman Bowie deposit today in an account earning6%, compounded annually, so that he will have enough money on hand in3years 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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