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9 March, 13:48

Olivia and her spouse have saved $4,500 for a 12-day cruise vacation in europe. the couple needs $5,000 for a "nice" cabin or $6,000 for a "luxury" cabin. if cabin prices are expected to remain constant for the next three years and olivia expects to earn 6% per year on her investments, will the couple's savings be enough to afford the "nice" cabin in three years? can they afford the luxury cabin? why or why not?

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  1. 9 March, 17:19
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    In this item, we are to solve for the future worth of the $4,500 that is invested at present and will have a compound interest of 6% per year for the next three years. To solve for the future worth,

    F = P x (1 + r) ^n

    where F is the future worth, P is the present worth, r is the decimal equivalent of the given rate, n is the number of years.

    Substituting the known values,

    F = ($4,500) x (1.06) ^3

    F = $5,359.57

    Since the future worth of the money is greater compared to the price of the nice cabin then, Olivia and her spouse will have enough money for the "nice" cabin.
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