DrJWants to Buy an IBM Personal Computer Which Will Cost

question 24

Multiple Choice

Dr.J.wants to buy an IBM personal computer which will cost $2,788 four years from today.He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed.He can earn a 7% annual return.How much should he set aside?

• A) $697.00
• B) $627.94
• C) $823.15
• D) $531.81

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Definitions:

Net Capital Outflow

The difference marked by domestic people's foreign asset purchases compared to foreign people's domestic asset acquisitions.

Software

Programs and other operating information used by a computer to perform specific tasks.

Real Exchange Rate

The pace at which one country's currency can be swapped for that of another, after accounting for inflation.

Nominal Exchange Rate

The rate at which one currency can be exchanged for another currency, not adjusted for inflationary differences between the two currency areas.