You Are Considering Two Savings Options

question 49

Multiple Choice

You are considering two savings options. Both options offer a rate of return of 7.6 percent. The first option is to save $2,500, $2,500, and $3,000 at the end of each year for the next three years, respectively. The other option is to save one lump sum amount today. You want to have the same balance in your savings account at the end of the three years, regardless of the savings method you select. If you select the lump sum method, how much do you need to save today? 

• A) $7,414.59 
• B) $6,289.74 
• C) $6,660.00 
• D) $6,890.89 
• E) $6,784.20 

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Definitions:

Information Processing System

A system, either computational or biological, that processes data or information following a set of procedures or algorithms.

Long-Term Memory

The aspect of memory in which information is stored for an extended period, potentially for a lifetime.

Cognitive System

A complex system in the brain responsible for thought, memory, learning, and perception.

Adaptation

The process of adjusting to changes in the environment, or a modification made to something to adjust to a new use or condition.