Morgan Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online, Morgan has developed the following estimates. Engine Overhaul Estimated Cash Outflow $310 510 740 880 Probability Assessment 10% 30% 50% 10%

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Morgan Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the
engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some
research online, Morgan has developed the following estimates.
Engine Overhaul
Estimated Cash Outflow
$310
510
740
880
Probability
Assessment
Click here to view factor tables.
10%
30%
50%
10%
How much should Morgan Bowie deposit today in an account earning 8%, compounded annually, so that he will have enough money on
hand in 2 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g.
458,581.)
Transcribed Image Text:Morgan Bowie is trying to determine the amount to set aside so that he will have enough money on hand in 2 years to overhaul the engine on his vintage used car. While there is some uncertainty about the cost of engine overhauls in 2 years, by conducting some research online, Morgan has developed the following estimates. Engine Overhaul Estimated Cash Outflow $310 510 740 880 Probability Assessment Click here to view factor tables. 10% 30% 50% 10% How much should Morgan Bowie deposit today in an account earning 8%, compounded annually, so that he will have enough money on hand in 2 years to pay for the overhaul? (Round factor values to 5 decimal places, e.g. 1.25124 and final answer to O decimal places, e.g. 458,581.)
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