Question 1) You are considering partial retirement. To do so you need to use part of your savings to supplement your income for the next five years. Suppose you need an extra $15,000 per year. What lump sum do you have to invest now to supplement your income for five years? Assume that your minumum desired rate of return is 16% compounded annually.
Question 2) You have always dreamed of taking a trip to Machu Pichu. What lump sum do you have to invest today to have the $12,000 needed for the trip in three years? Assume that you can invest the money at 10%.