1. You plan to go to Asia to visit friends in three years. The trip is expected to cost a total of $10,000 at that time. Your parents have deposited $5,000 for you in a Certificate of Deposit paying 6% interest annually, maturing three years from now. Uncle Lee has agreed to pay for all remaining expenses. If you are going to put Uncle Lee's gift in an investment earning 10% over the next three years, how much must he deposit today, so you can visit your friends three years from today

$3,039

Explanation:

Expected total cost=$10,000

Parents deposit=$5,000 maturing in three years

Find Value of parents deposits in three years

FV=PV×(1+I)^n

Where

FV=future value

PV=present value=$5,000

I=interest rate=6%

n=number of years=3

FV=$5,000×(1+0.06)^3

=$5,000×(1.06)^3

=$5000×1.191016

=$5,955.08

Balance=$10,000-$5,955.08

=$4,044.92

Uncle Lee is willing to pay the balance if the money is deposited in an investment that yields 10% annually.

Find uncle Lee's present value (PV)

FV=PV×(1+i)^n

PV=FV/(1+I)^n

PV=$4,044.92/(1+0.10)^3

=$4,044.92/(1.1,0)^3

=$4,044.92/1.331

=$3,039.0082

Approximately $3,039

enjoy the dunce cap fool

answer(d) encourage cooperation by improving the chances of mutually agreeable transactions;