Al Darby Wants to Withdraw $20,000 (Including Principal) from an Investment

question 44

Multiple Choice

Al Darby wants to withdraw $20,000 (including principal) from an investment fund at the end of each year for five years. How should he compute his required initial investment at the beginning of the first year if the fund earns 10% compounded annually?

• A) $20,000 times the future value of a 5-year, 10% ordinary annuity of 1.
• B) $20,000 divided by the future value of a 5-year, 10% ordinary annuity of 1.
• C) $20,000 times the present value of a 5-year, 10% ordinary annuity of 1.
• D) $20,000 divided by the present value of a 5-year, 10% ordinary annuity of 1.

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Definitions:

Intergenerational Mobility

The changes in social status which happen from one generation to the next within a family or community.

Midlife Occupation

Pertains to the work or profession individuals typically engage in during their middle adulthood, often reflecting a period of peak career performance and stability.

Parents' Occupations

Refers to the jobs or professions practiced by mothers and fathers, often considered in research on socioeconomic status and child outcomes.

Ascription-Based Society

A society in which social status is largely determined by birth, family background, and other characteristics not achieved by individual effort or merit.