You Would Like to Have $50,000 for a New Car

question 146

Multiple Choice

You would like to have $50,000 for a new car in six years. If you deposit money today in a bank CD that pays 4 percent per year, how much must your deposit be?

• A) $38,050
• B) $39,516
• C) $40,323
• D) $42,108

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Definitions:

Required Return

The least percentage of profit or gain expected by an investor for taking the risk to invest in a specific asset or project.

Annual Dividend

The annual sum of dividends disbursed by a corporation to its stockholders.

Preferred Stock

A class of ownership in a corporation that has a higher claim on assets and earnings than common stock, usually with fixed dividends.

Par Value

The nominal or face value of a bond, share of stock, or other financial instrument, as stated by the issuer.