Ruth H Wants to Build a House in 12 Years

question 60

Multiple Choice

Ruth H. wants to build a house in 12 years. She estimates that the total cost will be $350,000. If she can put aside $20,000 at the end of each year, what rate of return must she earn in order to have the amount needed, assuming annual compounding?

• A) between 11% and 12%
• B) between 8% and 9%
• C) 17%
• D) 6.63%

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Definitions:

Positive Externalities

Benefits that are enjoyed by a third-party or the society at large as a result of an economic transaction.

Optimal Output

The level of production at which a firm or economy can produce goods at the lowest average cost, maximizing efficiency.

Government

The system or group of people governing an organized community, often a state, and the mechanisms and institutions through which they rule.

Efficiency Loss

Efficiency loss, also known as deadweight loss, is the loss of economic efficiency that can occur when the equilibrium for a good or a service is not achieved or is not achievable.