If Jethro Wanted to Save a Set Amount Each Month

question 12

Multiple Choice

If Jethro wanted to save a set amount each month in order to buy a new pick-up truck when the new models are next available, which time value concept would be used to determine the monthly payment?

• A) Present value of one.
• B) Future value of one.
• C) Present value of an annuity due.
• D) Future value of an ordinary annuity.

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Definitions:

Paycheck

A paper document or electronic transfer issued by an employer to pay an employee for services rendered.

Inertia

A tendency to do nothing or to remain unchanged, often used metaphorically to describe economic or financial systems' resistance to change.

Economic Models

Simplified representations of complex economic processes used to predict and analyze economic behaviors and outcomes.

Rational Behavior

Decision-making behavior that is consistent with logical or sensible choice, aiming to maximize personal advantage in terms of utility or profit.