When You Retire Forty Years from Now, You Want to Have

question 246

Multiple Choice

When you retire forty years from now, you want to have $1 million. You think you can earn an average of 8.5% on your money. To meet this goal, you are trying to decide whether to deposit a lump sum today, or to wait and deposit a lump sum five years from today. How much more will you have to deposit as a lump sum if you wait for five years before making the deposit?

• A) $18,001.06
• B) $18,677.78
• C) $18,998.03
• D) $19,272.81
• E) $21,036.83

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Definitions:

Unfavorable

A term often used in budgeting and financial analysis to describe results that are worse than expected or budgeted figures.

Cost Variance

The difference between actual cost and the flexible budget at actual volumes.

Actual Cost

The incurred expenditure on materials, labor, and overhead necessary to produce a product or perform a service, reflecting the genuine expense.

Standard Cost

A pre-determined cost of manufacturing a product or delivering a service, calculated to help manage budgets and performance evaluations.