Jenna Would Like to Purchase a New Car in Three

question 85

Multiple Choice

Jenna would like to purchase a new car in three years.If she saves $1,000 per year in an account that pays 8% annual interest for the next 3 years,how much will she have saved for a down payment? (Round the final answer to the nearest dollar.) Values for i=8%,n=3
$\begin{array}{|l|r|}\hline\text { Present value of an ordinary annuity of } \$ 1 & 2.577 \\\hline \text { Present value of } \$ 1 \text { : } & .772 \\\hline \text { Future value of an ordinary annuity of } \$ 1 & 3.246 \\\hline \text { Future value of } \$ 1: & 1.260 \\\hline\end{array}$

• A) $3,246
• B) $3,772
• C) $3,577
• D) $2,577

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Definitions:

Equity Account

An account that represents the ownership interest of shareholders in a corporation, reflected in common and preferred shares.

Fixed Costs

Expenses that do not change with the level of production or sales activities, within a relevant period.

Variable Cost

Costs that vary in total in direct proportion to changes in the level of activity or volume of production.

Operating Leverage

The degree to which a firm or project can increase operating income by increasing revenue, reflecting the proportion of fixed costs to variable costs.