(Advanced Analysis) Alex Wants to Have $800 Saved Up at the End

question 109

Multiple Choice

(Advanced analysis) Alex wants to have $800 saved up at the end of 10 years. If he deposits $500 today, what annually compounded rate of interest would he have to earn to reach his goal?

• A) 4.8 percent
• B) 5.2 percent
• C) 5.7 percent
• D) 6.2 percent

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Definitions:

Value of Money

The purchasing power of money, indicating the amount of goods or services that one unit of money can buy, subject to change due to inflation or deflation.

Interest Rate

The percentage of an amount of money which is charged for its use per a certain period, often annually, by a lender to a borrower.

Medium of Exchange

A medium of exchange is anything widely accepted as a form of payment, making trade easier by eliminating the need for a coincidence of wants.

Store of Value

An asset, commodity, or currency that can be saved, retrieved, and exchanged in the future without significantly losing value.