You wish to buy a cabin in 15 years. today, the cabin costs $150,000. you believe the price of the cabin will inflate at 4% annually. you want to invest a single amount of money (lump sum) today and have the money grow to equal the future purchase price of the cabin 15 years from now. if you can earn 10% annually on your investments, how much do you need to invest now, in order to be able to purchase the cabin?

I will need to invest 64,669.73 dollars now.

Explanation:

We will calcualte the future value of the cabin considering the inflation:

Principal150,000.00

time  15 years

inflation 0.04000

Amount270,141.53

Then we calculate the present value of the lump sum at 15 years discounted at 10% which is the yield of the funds

Maturity  270,141.53

time   15 years

rate  0.10

PV   64,669.73

we would need to deposit 64,669.73 today to get enough cash to purchase the bcabin in 15 years.