Tishie Invests $3,000 Today at a 9% Rate of Return

question 234

Multiple Choice

Tishie invests $3,000 today at a 9% rate of return. She wants to have $24,000 to give to her granddaughter Kathy for college 16 years from now. Which one of the following statements is correct concerning Tishie's situation?

• A) Tishie will have the $24,000 when she wants it.
• B) Tishie would have to wait an additional ten years to have $24,000.
• C) Tishie would have to earn a 10% rate of return to have $24,000 in 16 years.
• D) Tishie will only have approximately $12,000 sixteen years from now.
• E) Tishie should plan on only giving Kathy $10,000 in sixteen years.

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Definitions:

Wage Rate

The amount of money paid to an employee for a specified quantity of work, typically expressed on an hourly, daily, or piecework basis.

Optimal Level

The most favorable point, level, or condition for achieving a specific goal or maximizing a specific outcome under given constraints.

Marginal Benefit

The boost in satisfaction or utility experienced by a consumer when consuming an extra unit of a good or service.

Immigration Law

Legal statutes and regulations that govern who can enter a country, how long they can stay, and what activities they can undertake while they are there.