The Solution to This Problem Requires Time Value of Money

question 128

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. Josh and Sara want to buy a house in 4 years.If the house will cost $180,000, how much must they deposit at the end of every year for the next 4 years at 5% compounded annually in order to buy the house?

• A) $32,040
• B) $36,990
• C) $41,763
• D) $45,000

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Definitions:

Condense

In mathematics, to condense an expression means to simplify it into a more compact form, often by using properties of logarithms or exponents.

Solution

The value or set of values that satisfy an equation, inequality, or system of equations, providing the answer to a mathematical problem.

Equation

A mathematical statement that asserts the equality of two expressions, typically in the form of 'A = B' where A and B can be algebraic expressions.

Logarithm

The exponent or power to which a base must be raised to yield a given number, generally expressed as log_base(number).