Isaac and Faith Both Want to Have $5,000 in Three

question 81

Multiple Choice

Isaac and Faith both want to have $5,000 in three years. Isaac expects to earn 8% on his investments and Faith expects a 7% rate of return. Which one of the following statements is correct
Concerning the amount of money they each need to invest today?

• A) Faith needs to deposit $112.33 more than Isaac today.
• B) Faith needs to deposit $173.33 more than Isaac today.
• C) Isaac needs to deposit $3,699.16 today.
• D) Faith needs to deposit $3,081.49 today.
• E) Both Faith and Isaac should deposit $3,969.16 today.

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Definitions:

Closed Economy

An economic system that does not engage in international trade with outside countries, relying on its own resources.

Accounting Identity

A fundamental equation that must always hold true, often without regard to time or specific instances, in accounting and economics.

Government Purchases

Expenditures by the government sector for goods and services that are consumed within the current period.

Closed Economy

An economic system that does not interact with other economies in terms of international trade or financial transactions.