You Are Going to Withdraw $1,000 at the End of Each

question 348

Multiple Choice

You are going to withdraw $1,000 at the end of each year for the next three years from an account that pays interest at a rate of 8% compounded annually. How much must there be in the account today in order for the account to reduce to a balance of zero after the last withdrawal?

• A) $793.83
• B) $2,577.10
• C) $2,602.29
• D) $2,713.75
• E) $2,775.67

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Definitions:

Market Power

The ability of a firm or group of firms to manipulate or control the price and supply of a product or service in the market.

Profit Maximizing

A strategy or process undertaken by a firm to achieve the highest possible profit from its operations.

Price

The amount of money required to purchase a product or service.

Price Elasticity Of Demand

Percentage change in quantity demanded of a good resulting from a 1-percent increase in its price.