Lee Wishes to Accumulate $1 Million by Making Equal Annual

question 54

Multiple Choice

Lee wishes to accumulate $1 million by making equal annual end-of-year deposits over the next 20 years. If he can earn 10 percent on his investments, how much must he deposit at the end of each year?

• A) $14,900
• B) $50,000
• C) $117,453
• D) $17,460

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Definitions:

Required Rate of Return

The minimum return an investor expects to achieve from an investment, considering its risk level and alternative opportunities.

Growing Annuity

A series of cash flows that grow at a consistent rate for a finite number of periods.

Cash Flow Growth Rate

The rate at which a company's cash flow from operations grows over a specific time period, indicating financial health and performance.

Required Rate of Return

The minimum yearly return rate that convinces individuals or firms to put their investment into a certain security or project.