Robert Blanding's employer offers its workers a two-month paid sabbatical every seven years. Robert, who just started working for the firm, plans to spend his sabbatical touring Europe at an estimated cost of $25,000.
To finance his trip, Robert plans to make six annual end-of-year deposits of $2,500 each, starting this year, into an investment account earning 8 percent interest.
a. Will Robert's account balance at the end of seven years be enough to pay for his trip?
b. Suppose Robert increases his annual contribution to $3,150. How large will his account balance be at the end of seven years?