The Solution to This Problem Requires Time Value of Money

question 126

Multiple Choice

The solution to this problem requires time value of money calculations.Reference to Tables 9-1 through 9-4 in the text is necessary to complete the calculations.
-
David,a high school math teacher,wants to set up an IRA account into which he will deposit $2,000 per year.He plans to teach for 20 more years and then retire.If the interest on his account is 7% compounded annually,how much will be in his account when he retires?

• A)$4,800
• B)$21,118
• C)$74,458
• D)$81,990

---

Definitions:

Monthly Payment

A fixed amount of money paid on a regular monthly basis for a wide range of financial obligations, including loans or rent.

Sub-prime Loan

A loan offered to individuals with poor credit histories or higher risk of default than prime borrowers, often at a higher interest rate.

Prime Rate

The interest rate that commercial banks charge their most credit-worthy customers, often used as a benchmark for other rates.

Credit Worthiness

An assessment of a borrower's ability to repay a loan or debt based on their financial history and current status.