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Take a Test-Oshayne Whittingham -Google Chrome Secure | https//www.mathd.com/Student/PlayerTest.aspx?testid=172873572&centerwinayes; Principles of Business Finance Test: Exam 2 Time Remaining: 01:17:13 Submit Test This Question: 1 pt 32 of 41 (32 complete) This Test: 41 pts possible You want to travel to Europe to visit relatives when you graduate from college three years from now. The trip is expected to cost a total of $10,000 Your parents have deposited $5,000 for you in a CD paying 6% interest annually maturing three years from now. Aunt Hilda has agreed to finance the balance if you are going to put Aunt Hilda's gift in an investment earning 10% annually over the next three years, how much must she deposit now so you cán visit your relatives in three years? O A. $3.345 B. S3757 O C. $3.801 O D. $3,039

Explanation / Answer

Cost of Trip = $10,000

Amount deposited in CD = $5,000
Interest Rate = 6%

Maturity Value after 3 years = $5,000 * 1.06^3
Maturity Value after 3 years = $5,000 * 1.1910
Maturity Value after 3 years = $5,955

Balance is financed by Aunt Hilda

Amount financed = $10,000 - $5,955
Amount financed = $4,045

Amount received from Aunt is deposited into an account which pays 10% for next 3 years

Amount deposited * 1.10^3 = $4,045
Amount deposited * 1.331 = $4,045
Amount deposited = $3,039

So, Aunt Hilda deposited $3,039 into the account

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