Al Darby wants to withdraw $20,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually?
a. $20,000 times the future value of a 5-year, 10% ordinary annuity of 1.
b. $20,000 divided by the future value of a 5-year, 10% ordinary annuity of 1.
c. $20,000 times the present value of a 5-year, 10% ordinary annuity of 1.
d. $20,000 divided by the present value of a 5-year, 10% ordinary annuity of 1.
Answer: c. $20,000 times the present value of a 5-year, 10% ordinary annuity of 1.
You might also like to view...
Aida decided to switch doctors after she had to wait two and a half hours at her scheduled appointment to see her doctor. She experienced the ethical problem factor that leads to customer switching behavior
Indicate whether the statement is true or false
Competitors are most likely to react to a price change when ________
A) the firm has a weak value proposition B) the firm enjoys a monopoly C) there are few competing firms D) the product is heterogeneous E) buyers have limited information